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Basic Planning Documents
Jan L. Warner & Jan Collins

Question: I’ve read your column for a number of months but unless I missed it, I haven’t seen you talk about the basic documents that ordinary people need to protect themselves should they become unable to take care of themselves physically or mentally. I am a 57-year-old man with a wife and two grown children. Thank you.

Answer: Everyone with the ability to do so should sign two important documents that allow trusted third persons to manage their property and health care should they become incapacitated.

1) Financial Management: With a durable power of attorney, you give another person or entity (called your “agent” or “attorney in fact”) the authority to manage your finances under circumstance that you delineate. Unless you specifically provide to the contrary, the person to whom you grant this authority must act in your best interests, not his. For example, without a specific grant of authority, your agent cannot make gifts to himself, pay his creditors, or engage in activities that benefit him. It is important that the power of attorney be "durable", that is, include language that allows the power of attorney to remain in effect should you become incapacitated – which is when you need it most. If you have a long-term marriage, you should consider including the authority to make gifts to your spouse because, without this specific language, asset transfers for the benefit of your spouse, which are sometimes essential for planning purposes, may be impossible.

Since some folks are rightfully uncomfortable giving an agent immediate, unlimited authority over their assets, they use the "springing" durable power of attorney that doesn’t become effective until an event takes place -- such as incapacity of the principal. Generally, powers of attorney can be revoked at any time prior to incapacity.

2) Health Care Management: While living wills include directions to one’s physician and family about the health care steps to be taken at end of life, a more flexible planning document for health care is the durable health care power of attorney. When this document is in effect, the agent “stands in the shoes of” the principal regarding all health care decisions, and health care providers are bound to honor these decisions as if they were the decisions of the principal. Most health care powers of attorney are, in fact, "springing" durable powers of attorney that become effective upon the incapacity of the principal and can be revoked at any time prior to incapacity.

If these two important documents are not in place and an individual becomes incapacitated, the family may be required to bring guardianship and conservatorship proceedings in the probate or surrogate court. These legal actions seek to have a judge appoint individuals to handle the physical and financial decisions of an incapacitated person. The guardian is responsible for the physical and medical decisions, while the conservator manages the finances. The guardian and conservator may be the same person, two different persons, or a person along with a corporation or an unrelated person. These actions sometimes pit brother against sister and are much more expensive than powers of attorney.

We suggest that you never use ready-made forms or fill in the blanks. Since the laws of each state are different, and because all situations are not the same, be sure to consult trained professionals where you live.

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