Elder Planning: Substitute Decision Making
In so many areas of financial and personal legal planning if you fail to plan, the law, by default, will impose a plan on you. Quite often that imposed plan is not only more costly than if you had done personal planning, but may not even approximate what you would have chosen had you done proper planning. In the area of wills, for example, if you neglect to have a will drawn, the law determines who gets your assets.
Nowhere is this failure to plan more important than in the area of planning for incapacity. If you do not have a Durable Power of Attorney, that is, a document by which you appoint the person you wish to make financial decisions for you and the conditions for exercising those decisions, the law will require that a guardian or conservator be appointed on your behalf. This person may or may not be the person whom you would have chosen to help manage your financial affairs. In addition, the process of a guardianship or a conservatorship is much more time consuming and costly than merely having a Durable Power of Attorney drafted for you.
Power of Attorney
For some people, a Power of Attorney conjures up images of being able to leap tall subpoenas in a single bound. In reality, a Power of Attorney is a written document that enables a person known as the principal to designate another person or persons as his attorney-in-fact, which means that this person can act on the principal’s behalf. Although this person is called an attorney, in this context, the word “attorney” merely means agent. He or she does not have to be a lawyer. The scope of the Power of Attorney can be as broad or as limited as desired.
For many years Powers of Attorney allowed you as principal to appoint someone to manage your financial affairs unless you were incapacitated. In other words, you could appoint someone to act on your behalf unless you actually needed someone to do so, at which time the Power of Attorney was automatically deemed void and invalid. It only took our legislators around 200 years to realize that when someone is incapacitated, that is precisely when they need someone to act on their behalf and when they want it to be the person of their choosing. The reasoning behind the older Power of Attorney laws was that because potentially people were giving someone else so much power over their finances, the law wanted this power to be always revocable and, it was thought, someone who was incapacitated would not be able to revoke the Power of Attorney. Finally though, the legislatures around the country recognized that people wanted Powers of Attorney to be effective at just those times, and so the Durable Power of Attorney was born.