During the COVID-19 pandemic, it became clear that anyone can become incapacitated at any time for unforeseen reasons. In fact, research shows our chances of becoming mentally or physically incapacitated jumps to 50% as we approach our 65th birthday and gradually increases until age 80 when it spikes to a 75% chance of becoming incapacitated. This is why a Power of Attorney (POA) is just as important as your Last Will & Testament.
Who Handles Your Finances If You Become Incapacitated?
You may be surprised to learn that your spouse does not have automatic authority over your financial and healthcare decisions if you become mentally or physically incapacitated. You need to specifically name your spouse when you prepare a POA before financial institutions will give them access to your assets. Though each state has its own laws outlining the specific parameters of a POA, they usually fall into two categories: healthcare and financial.
Advance Healthcare Directives
Advance healthcare directives help ensure your wishes are respected when you’re unable to make healthcare decisions for yourself. A Durable Power of Attorney for Health Care names the person you’ve chosen to make your healthcare decisions. Depending on where you live, it’s also known as Medical Power of Attorney, Health Care Power of Attorney, Designation of Health Care Surrogate, or Health Care Proxy. A Living Will describes your preferences for healthcare treatment while an Advance Directive combines a Living Will and Power of Attorney for Healthcare. Check your state laws to ensure you’ll have the right document.
“A Limited POA names specific financial matters for which your agent can act on your behalf like paying your bills or managing your retirement accounts.”
Financial Power of Attorney
A financial POA enables the person you name as your agent to manage your financial and business affairs when your become unable to make decisions for yourself. Depending on your state’s laws, this type of POA can be a General or a Limited POA. A General POA usually gives your agent access to your accounts and the ability to make a range of banking decisions. A Limited POA names specific financial matters for which your agent can act on your behalf like paying your bills or managing your retirement accounts.
Durable Power of Attorney (DPOA)
A Durable Power of Attorney remains in effect if you become incapacitated or unable to make decisions for yourself. With a comprehensive DPOA, you can select an agent and direct them to make specific decisions about your property, finances, investments, paying your bills, signing documents on your behalf and other financial matters specifically named the agreement. Though your DPOA agent can pay your medical bills, they cannot make decisions about your healthcare.
Source: https://www.investopedia.com/terms/p/powerofattorney.asp
