Estate Planning: Part 2

This Part 2 of a series about Estate Planning, written by attorney Michael Roberts*. Last month in Part 1 we talked about how Estate Planning is for Every Adult.

During the past few months we’ve seen numerous stories of individuals who have been laid up or ill for months at a time. While these individuals are unable to function as they’d normally like, that doesn’t stop the bills from coming or other important decisions from having to be made. If one of these periods of incapacitation occurred to you, would you be prepared?

Two of the most important estate planning documents that every individual should have are durable powers of attorney for healthcare and finances.

The durable power of attorney for health care (aka medical power of attorney or health care proxy) allows you to name a trusted person (“agent”) to oversee your medical care and make health care decisions for you if you are unable to do so. Your healthcare agent will work with doctors, and other healthcare providers, to make sure you get the kind of medical care you wish to receive.

When arranging your care, your agent is legally bound to follow your treatment preferences to the extent that he or she knows about them. Therefore, it is vital that you discuss your health care wishes with your agent prior to any treatment being necessary. Many people have strong feelings about the kind and degree of medical treatment they want. This is why it’s important to think carefully about whom to appoint; the person you choose should be someone you can expect to make decisions similar to those you would make for yourself…even if these decisions could very difficult for another to make. This person should be over 18 years old and be someone you trust with whom you can discuss your wishes frankly.

The other primary advance health care directive is known as the “living will”. This document spells out your preferences about certain kinds of life-sustaining treatments. For example, you can specifically indicate whether you do or do not want interventions such as cardiac resuscitation, tube feeding, and mechanical respiration.

Oftentimes, it is important to have both of these documents so that there is some clarity with the living will, while maintaining some flexibility with the durable power of attorney because not every situation can be anticipated.

Much like your physical health, your financial “health” will still need to be attended to in the event that something happens to you that causes incapacitation.

A durable power of attorney for finances is a power of attorney you create that gives someone the authority to handle financial transactions on your behalf when you are unable. With a durable power of attorney for finances, you can give a trusted person as much authority over your finances as you like and that person is usually known as your “agent”. While a power of attorney usually takes effect as soon as you sign it, its powers may be what are known as “springing” which means that they don’t go into effect until you become incapacitated. If it never becomes necessary, your agent may never use it.

Once it becomes necessary, your agent can then handle mundane tasks such as sorting through your mail and paying your bills, as well as more complex jobs like watching over your retirement accounts and other investments, or filing your tax returns. Your agent doesn’t have to be a financial expert; just someone you trust completely who has a good dose of common sense. If necessary, your agent can hire professionals (paying them out of your assets) to help out. Similar to your agent for health care, it is very important that your agent for finances is aware of all your wishes (i.e. investments, real estate) as well as being aware of all bills, payments, accounts, etc.

Why Separate Documents?
You may wonder why you can’t cover health care matters and finances in just one power of attorney document. Well, actually you could, but it isn’t the best idea. Making separate documents will keep life simpler for your agent and others.

For example, your health care documents are likely to be full of personal details, and perhaps feelings, that your financial broker doesn’t need to know, nor should they be privy to that information. Likewise, your healthcare professionals don’t need to be burdened with the details of your finances.

That said, even though you should make separate power of attorney documents for health care and finances, there is some rationale for naming the same agent under both documents. Working with one person allows for simplicity and efficiency. However, if you do have two trusted individuals who you feel can handle each job better, you should still be sure to choose those who will work well together.

If you have any further questions regarding powers of attorney or living wills, please feel free to reach me at mike@michaelrobertslaw.com.


*Michael Roberts is an attorney licensed in the State of Iowa since 2004. All information provided in this section is for educational purposes only, and should not be deemed legal advice. mike@michaelrobertslaw.com.