When your parents reach old age, they may find it challenging to handle specific responsibilities, such as financial ones. It may occur because of a change in their mental or physical state or because they are having trouble meeting their financial and legal obligations. In such a situation, a power of attorney could prove invaluable.
One can legally represent another (the “principal”) in their stead by having them sign a “power of attorney.” One can use the document in various situations, such as managing finances, making healthcare decisions, and handling legal matters.
Power of attorney is enormously beneficial for older parents. It can give them peace of mind knowing that someone they trust is in charge of their affairs, and it can also make things easier for family members who may need to step in and help.
However, navigating the world of power of attorney can be confusing, especially for those unfamiliar with legal terminology and procedures. That’s why we’ve created this beginner’s guide to managing money for older parents.
This guide will provide an overview of a power of attorney, why it’s essential, and how to set one up. By the end of this guide, you’ll better understand how power of attorney works and how it can benefit your older parents.
What Is Power Of Attorney?
One can appoint another person to handle their financial and legal affairs on their behalf by drafting a power of attorney (POA). The POA authorizes the designated person, as an agent, to make decisions and conduct transactions in the best interests of the individual who granted them the authority.
The purpose of a POA is to provide older adults with an agent who can act on their behalf when they are unavailable, incapacitated, or unable to make decisions due to health problems.
There are different kinds of POAs, and the rules governing them can differ from state to state. The five most common types of POAs include:
1. General Power of Attorney
This type of POA gives the agent a broad range of power to act on behalf of the older adults for most legal and financial matters, such as signing documents, paying bills, or selling property. However, the general POA is not considered “durable” and ends once the older adult becomes mentally incapacitated.
2. Durable Power of Attorney
Unlike the general POA, a durable POA remains in effect regardless of older adults’ physical or mental condition, including during a coma or other event that makes them unable to communicate.
3. Medical Power of Attorney
This type of POA goes into effect only when an older adult is legally incapacitated. The agent has the legal authority to make decisions about the older person’s healthcare on their behalf, such as consenting to procedures or selecting a care facility.
4. Limited Power of Attorney
A limited POA grants the agent a limited amount of power, with specific limitations determined by the older person. It could include giving an agent control over a single action, such as buying or selling stock or a particular category of transactions or responsibilities.
5. Springing Power of Attorney
A “springing power of attorney” is a type of advance directive that doesn’t take effect until the older person has been deemed legally incapable of making decisions for themselves. For older adults who value their independence, a “springing power of attorney” may be the best option. But, there may be issues and setbacks in the future with this choice.
Getting a medical opinion on the matter of competency can be time-consuming and expensive, not to mention fraught with potential legal complications.
Why Does An Older Person Need A Power Of Attorney?
As our loved ones age, having conversations about their legal and financial affairs is vital. One crucial legal document they might require is a power of attorney (POA).
An older person can designate another person or themselves to handle specific business and legal matters on their behalf by executing a power of attorney. Here are some of the common reasons why an aging adult may need a power of attorney:
1. Financial Difficulties
The ability to pay bills on time and make sound financial judgments declines with age. Your loved one having trouble meeting their financial commitments may benefit from having you act as their power of attorney.
With a POA, you can pay bills, manage bank accounts, and make financial decisions in your best interest.
2. Chronic Illness
A power of attorney (POA) can help you manage your parent’s financial and medical needs so that they can focus on getting better. A POA could, for instance, be in effect while the patient has chemotherapy but repealed once the cancer has been successfully treated. It’s appropriate for both life-threatening and chronic conditions.
With a POA, you can manage your financial affairs, pay bills, and make medical decisions in your best interest.
3. Memory Impairment
Memory impairment, such as Alzheimer’s disease or other types of dementia, can make it difficult for aging adults to manage their affairs. A POA allows their children or other trusted individuals to manage their finances and make decisions on their behalf. It’s important to note that while aging adults still have their faculties working, they must sign the paperwork.
4. Upcoming Surgery
If an aging adult has to undergo surgery, they may need assistance managing their affairs under anesthesia or recovering from surgery. With a medical power of attorney, you can make choices about their care and finances on their behalf.
5. Regular Travel
It is common for older adults to take frequent trips or spend the winter months in warmer regions. If they have financial responsibilities back home, a power of attorney can meet them.
Making payments, handling bank accounts, and making other financial choices on their behalf while they are abroad is all possible with a power of attorney.
When Does Power Of Attorney End?
You can delegate legal authority to another person by drafting a power of attorney (POA). While a power of attorney can be helpful in many different scenarios, it is not an indefinite legal document. You can use it in various contexts, including personal finance, medical decisions, and business deals. The following are the circumstances under which a power of attorney becomes invalid.
1. Expiration
Regardless of the circumstances under which the POA was given, there is typically an end date on a power of attorney paperwork. The agent’s authority will expire on a specific date, even if the principal is still alive and can make their own choices. The POA should include an exact termination date.
2. Revocation
For those given a copy of the initial POA, sending a revocation of power of attorney to the agent and any healthcare or financial institutions is essential. The principal who issued the POA may revoke it at any moment. You can withdraw the existing POA in writing or have a new one executed to replace the old one.
3. Death
A power of attorney immediately expires when the grantor of a power of attorney passes away. Once the principal dies, the agent’s authority to act on the principal’s behalf ends. A person’s estate is given to an executor upon death.
4. Incapacity
A power of attorney may lapse if the principal who issued it can’t do so, as specified in the document. If the POA is a “durable power of attorney,” then the agent can keep acting on behalf of the principal even if the principal loses mental capacity.
But, the agent’s power could revert to the principal if the POA is not permanent and the principal subsequently loses capacity.
5. Fulfillment of Purpose
When the original intent is no longer served, a power of attorney may also expire. The agent’s authority may expire if an attorney was issued to conduct a specific commercial transaction and that transaction is complete.
Revoking A Power Of Attorney
Changing circumstances is one example of when revoking a power of attorney is necessary. Unless the principal has become mentally incapable, the principal may cancel a power of attorney at any time and for any cause.
Consult with an experienced elder law or estate planning attorney to ensure the proper execution of the revocation. These professionals can help you withdraw an existing power of attorney and write up a new one when available.
When drawing out a new one, you should always add a declaration revoking any prior powers of attorney. Additionally, you should provide copies of the new power of attorney to all institutions with old documents.
After revoking a power of attorney, a lawyer may advise the principal to go and get the prior agent’s copy. If the principal can’t personally notify the former agent, they can consider sending a written, certified letter via the United States Postal Service.
Remember that each state has rules for interpreting and enforcing powers of attorney. Therefore, speak with an attorney experienced in elder law or estate planning and licensed to practice in your state.
Who Can Override A Power Of Attorney?
A power of attorney can be terminated at any time by the principal, who retains complete control over the situation. Remember that implementing laws about powers of attorney can vary widely from one state to the next.
A local elder law or estate planning attorney is your best bet for answers to state-specific problems; only 30 states have embraced The Uniform Power of Attorney Act since 2006.
They are qualified to offer advice that is in line with the laws and regulations of your state.
Summary
In conclusion, setting up a power of attorney for older parents is vital in preparing for their future and ensuring their wishes are respected. There are different types of power of attorney, and it’s crucial to understand each one and choose the most appropriate one based on your parent’s needs and circumstances.
Working with an attorney can help things go more smoothly and ensure everything gets noticed. Remember that you can revoke a power of attorney at any time, and it’s crucial to keep it updated to reflect any changes in your parent’s wishes or circumstances.
With proper planning and execution, a power of attorney can provide peace of mind and support for older parents and their families.
