How to set up a proxy | Family finances

The appointment of a power of attorney is essential to the creation of a solid financial planbut you might be surprised to learn that many experts recommend that this power be appointed as soon as individuals reach the age of 18.

Power of Attorney allows a third party, known as an attorney or proxy, to make financial, legal, and sometimes health care decisions on someone’s behalf. Without a power of attorney, loved ones can be rendered unable to manage the health care decisions and finances of any adult unable to do so themselves – whether that person is a 19-year-old car accident victim or a person 90 years old. elderly people requiring nursing home care.

“From the moment you hit 18, you need it,” says Jennifer D. Taddeo, estate planning attorney and partner at Conn Kavanaugh in Boston. “It’s my 18 year olds who are the most upset when they hear about this because they assume mum and dad could step in and make these decisions, but that’s not the case. They have no legal authority at all. when the child turns 18.”

When it’s time to appoint a power of attorney, it’s important to know the laws in your own state, as the rules can vary, though David M. Postic, estate planning attorney at Postic & Bates in Oklahoma City, says that States generally work from the same basic principles. .

To get started, follow these basic guidelines for appointing a power of attorney:

  • How to establish a power of attorney.
  • Consider an enduring power of attorney.
  • Limited or general power of attorney.
  • Power of attorney with immediate effect vs power of attorney with spring effect.
  • Power of attorney for health care.

How to establish a power of attorney

The first step in creating a power of attorney is to decide who should receive this designation and the liability that comes with it. The person chosen as proxy should be trustworthy, organized and calm under pressure, says Taddeo.

Once you’ve thought about who might serve as your attorney, it’s time to draft the document. Consumers can use online sites to draft this document or contact an estate planning attorney. The power of attorney document usually works in conjunction with other estate planning and medical documents, such as a will behealth care proxy and medical information privacy authorization.

Once the document is drafted, Taddeo says clients should be careful about who receives a copy of the document and where the document is stored, particularly if the power of attorney takes effect immediately.

“I give my clients the 1-2-3 rule: one original, and that original is going to appoint two people, a lead attorney actually and a secondary attorney actually. And they’re going to keep that original. appointing two people to three places: their fireproof safe, a safe in a bank, or if they don’t have room for it, we’ll keep it for them in our fireproof safe,” she says. a way to limit the power of this truly powerful document.”

The last step in establishing a power of attorney is to keep this document. Some financial institutions will refuse to honor a power of attorney document they consider outdated, so some estate planning attorneys ask their clients to review and update the power of attorney document every three to five years – although this is not always the case. necessary. The document must also be updated whenever there is a birth, death, marriage or a major financial event in the family, says Taddeo.

Consider an Enduring Power of Attorney

Powers of attorney typically end when the grantor becomes unable to make decisions for themselves – but this is precisely when individuals may want a trusted agent to act on their behalf.

For this reason, a durable power of attorney can be very useful. Agents named in a durable power of attorney can make financial or medical decisions on behalf of the grantor even after the person has become incompetent.

Power of attorney with immediate effect or with immediate effect

Individuals have the option of creating a power of attorney that takes effect immediately upon signing or that only takes effect in predetermined circumstances, such as in cases where the grantor becomes incapacitated. This option is called a temporary power of attorney.

This may sound very appealing, but some estate planning lawyers caution those considering going down the spring-loaded power of attorney route.

“I generally recommend that people forego spring-loaded power of attorney and just have immediate power of attorney,” Postic says. “If there is a temporary power of attorney, which means it comes into effect when the person becomes incapacitated, anyone trying to act on behalf of the grantor needs some kind of medical evaluation. medical evaluation is not enough. come quickly, and certainly, whenever someone needs to use a power of attorney for health care, time is of the essence.”

Limited or general power of attorney

Some people may only want to appoint a power of attorney for a limited set of circumstances. A limited or special power of attorney allows the agent to perform only certain transactions, such as the sale of real estate, without granting them more general privileges.

A general power of attorney gives the attorney a broad scope financial, judicial and sometimes health authorities. This is the route recommended in most cases by William D. Kirchick, president of the National Association of Estate Planners and Councils and partner in the private client department at Nutter in Boston, because he says the limits placed on an agent can sometimes do more harm. how good.

“Some states like New York have a checklist of what you want (the officer) to do or don’t want them to do,” says Kirchick. “If you’re going to give the person authority, I want them to have as much authority as possible because you don’t know what’s going to happen. If you don’t trust the person to do certain things, why you give them power of attorney in the first place?”

Power of attorney for health care

Finally, individuals should consider including a medical power of attorney in their power of attorney planning. This person, also known as a health care proxy, should know your medical wishes and be trusted to make medical decisions on your behalf.

It can be helpful for the power of attorney and health care attorney to work closely together, Kirchick says, because the power of attorney is often responsible for making sure medical bills and nursing home bills are paid, but should also be informed of the individual’s desire for treatment and living arrangements.

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