We often associate estate planning with wills and trusts, but there are other, very important documents that are part of an estate plan. Wills and trusts are important when someone passes away, but what happens if someone becomes incapacitated during their life? Power of attorney documents can be used to give someone else authority to act on your behalf if you are unable to do so.

A General or Durable Power of Attorney is a document that gives your designated agent the authority to manage your assets and financial affairs. This power of attorney can allow your agent to pay your bills, manage your financial accounts, operate a business and sell assets. A power of attorney is very important for everyone to have, as without them, undesirable results can occur upon incapacity.

Consider the following example. Farmer is unmarried and develops Alzheimer’s, which causes him to become incapacitated. Farmer did not set up an estate plan and thus has no power of attorney documents. Since Farmer is incapacitated and has no power of attorney, the probate court is forced to appoint a guardian for him. The court appoints a local attorney to be Farmer’s guardian. Farmer always wanted the neighbor to farm his land if Farmer was unable and wanted the neighbor to be able to buy it if it ever sold. The guardian attorney, needing to generate money for Farmer’s care, sells the farm at public auction. The neighbor cannot compete with the other bids and cannot buy the farm.

This scenario can be avoided by a power of attorney. Farmer could have named a power of attorney that he trusted to carry out his wishes. The power of attorney could have been a relative or friend. Additionally, Farmer could have directed his power of attorney to lease the land to the neighbor, and if land had to be sold, to offer it to the neighbor first. Power of attorney documents can be customized to each person’s unique situation. Farmer’s power of attorney document could have ensured that he was taken care and the farm went to the neighbor instead of being sold at auction.

Job responsibilities
What does it mean to serve as a power of attorney? A power of attorney is a fiduciary position. This means that the power of attorney must look out for the other person’s best interest, not his own. Power of attorney documents can allow for self-dealing by the agent as long as the deal is fair. For example, if Farmer named the neighbor as his power of attorney, the neighbor cannot buy the farm for half-price (unless expressly allowed by the power of attorney document). However, as long as the document allows for self-dealing, the neighbor could get an appraisal on the land and buy the land for appraised value. If the agent does anything that benefits himself to the detriment of the other person, the agent is personally liable for the detriment.

Another type of power of attorney is a health care power of attorney. As the name implies, this document allows you to appoint who you want to make medical decisions for you if you are unable. The health care power of attorney works in the same manner as the general power of attorney. The agent is required to make decisions in the best interest of the other person. Most health care power of attorney documents include an end-of-life directive that allows the agent to remove life support if the person is determined to be permanently unconscious.

Power of attorneys are very important documents to have that are not expensive or time-consuming to put into place. They should be prepared by an attorney to be sure they accurately reflect the intentions of the person. One or two quick trips to the lawyer’s office is all it should take to get power of attorneys in place.

Moore is an attorney with Wright & Moore Law Co. LPF. Email him at [email protected] or call 740-990-0750