Some people think that, because their assets are jointly owned with a spouse or are in a trust, they do not need a Power of Attorney, or that if they become incapacitated, their spouse automatically has the authority to make medical decisions on their behalf. Neither is necessarily true.
Power of Attorney
A Power of Attorney is a document by which an individual, called the “principal,” appoints another person, who is referred to as the “agent.” The document bestows upon the agent the authority to act on behalf of the principal using whatever powers the principal so chooses. State law dictates who can be an agent, whether more than one agent can be appointed, and if there are any limits as to what powers can be given to an agent.
A Power of Attorney can grant very broad powers to an agent, often called a “General” Power of Attorney, which usually provides for the agent to be able to conduct substantially all of the principal’s affairs on their behalf, such as to access and manage bank accounts, apply for Social Security or other government benefits, and file tax returns. Conversely, a Power of Attorney can be limited in scope or purpose. Such a Power of Attorney is called a “Limited” Power of Attorney. Examples of limited powers are the power to sign tax returns or to execute a particular transaction, like selling a house, on behalf of the principal.
For estate planning purposes, it is usually recommended that the Power of Attorney be “durable,” which means that the named agent will continue to have authority to act on behalf of the principal even if the principal is subsequently incapacitated. A Durable Power of Attorney is almost always “General” in the grant of power rather than “Limited.” Having a Durable Power of Attorney can likely avoid the need to have a guardian appointed by the court if the principal becomes disabled or incapacitated. Instead of a court-appointed guardian having the authority to handle affairs on the person’s behalf, the agent named in the Power of Attorney would have such authority without the need for prior court approval.
Advance Directive
An Advance Directive allows an individual to appoint someone to make medical decisions on their behalf in the event the individual is unable to make or communicate those decisions. In New Hampshire, this document is called a Durable Power of Attorney for Health Care. In Massachusetts, it is called a Health Care Proxy.
Typically, an Advance Directive becomes effective when one or more doctors determine that the individual does not have sufficient capacity to make or communicate health care decisions, at which time the named agent has the authority to make those decisions on that person’s behalf. Having an Advance Directive can avoid the need to have a guardian appointed by the applicable state court if you become incapacitated. In New Hampshire, if you do not have an Advance Directive and your doctors have determined that you are unable to make health care decisions, state law provides a hierarchy of specifically designated persons who can make such decisions on your behalf for a limited amount of time (which may or may not be the person you want making those decisions) after which a guardian will need to be appointed by the court.
It is important to have these documents in place to provide for the convenient handling of routine transactions, and making health care decisions, in the event of incapacity. An often over-looked demographic are those who have recently turned 18 years of age. Parents are no longer the legal guardian of their child once their child is eighteen. This means that the parent will not necessarily be able to act on the child’s behalf absent the child having signed a Power of Attorney and Advance Directive. This author recommends that everyone have these documents and that parents discuss them with their children so that a plan can be implemented once a child is no longer a minor.
This article was originally published in the Portsmouth Herald and can be found here.