Most people think of a will when they think of estate planning. And that is often a good place to begin. But it’s not the only estate planning resource that you can use, as distributing assets is not the only goal of an estate plan. People can – for example – also use powers of attorney, which are legal documents giving specific authorization to other individuals generally to be exercised in the event of the creator’s incapacitation due to illness or injury.
There are two different types of powers of attorney that are often used in place of a single, general power of attorney. These are known as a legal or financial power of attorney and a medical power of attorney.
A legal power of attorney
To start with, the legal or financial option focuses on making important decisions and taking other necessary actions. If someone is incapacitated, they pick an agent to do this on their behalf.
For example, if a person suffers a stroke and can no longer communicate, they need someone to be able to access their bank accounts, pay their property taxes, pay their income taxes, deal with real estate, pay medical bills and much more. Traditionally, only an individual is allowed to do this for themselves, but a power of attorney sets up another option if that person cannot make their own decisions.
A medical power of attorney
The second option is a medical power of attorney, which operates in much the same way. The difference is that the agent that is selected gets to make medical decisions for the person who has been incapacitated. To use the stroke example again, this could be very important when doctors need to know what type of treatment that individual wants – and if there are specific treatments they do not want. Picking an agent in advance means that this individual knows who will be making these key decisions for them, especially if the affected individual has not left initial instructions in a living will.
Both designations are important and can be a valuable part of an estate plan. If you have not yet included these in your plan, be sure you know what legal steps to take to set them up effectively with the assistance of an experienced legal professional.