Most people think estate planning is about deciding what happens after they pass away. While that is certainly an important part of the process, two of the most valuable estate planning documents protect you while you are still living, a Financial Power of Attorney and a Health Care Power of Attorney.
Life is unpredictable. An unexpected accident, serious illness, or even a temporary medical condition could leave you unable to make decisions for yourself. Without the proper Powers of Attorney in place, your loved ones may have to ask a probate court to appoint a guardian to manage your affairs. That process can be time-consuming, expensive, and emotionally difficult during an already stressful time.
Properly drafted Powers of Attorney can help your family avoid those complications while ensuring that someone you trust is legally authorized to act on your behalf.
What Is a Power of Attorney?
A Power of Attorney is a legal document that allows you (the “principal”) to appoint someone you trust (your “agent” or “attorney-in-fact”) to make decisions on your behalf. The authority you grant can be broad or limited depending on your needs and the person you choose has a fiduciary duty to act in your best interests and according to the authority you have granted.
There Are Two Types of Powers of Attorney
Although people often refer to “a” power of attorney, most estate plans include two separate documents: a Financial Power of Attorney and a Health Care Power of Attorney.
Financial Power of Attorney
A Financial Power of Attorney authorizes your agent to manage your financial and legal affairs. Depending on how the document is drafted, your agent may be able to:
- Pay bills and manage bank accounts
- Buy or sell real estate
- Handle investments
- File tax returns
- Conduct business transactions
- Apply for government benefits, including Medicaid
- Work with financial institutions and other professionals on your behalf
In Ohio, estate planning attorneys generally recommend a Durable Financial Power of Attorney, meaning it remains effective even if you later become incapacitated. This is often when the document becomes most important.
Health Care Power of Attorney
A Health Care Power of Attorney addresses a different set of decisions. Instead of managing your finances, your health care agent is authorized to make medical decisions for you if you are unable to communicate or make informed decisions yourself.
Your health care agent may:
- Speak with your physicians and other medical providers
- Consent to or refuse medical treatment
- Choose health care facilities
- Access your medical records
- Make medical decisions consistent with your wishes
Unlike a Financial Power of Attorney, a Health Care Power of Attorney generally becomes effective only if your doctor determines that you lack the capacity to make your own medical decisions. Until then, you remain in complete control of your health care.
A Health Care Power of Attorney is also commonly paired with a Living Will, which expresses your wishes regarding certain end-of-life medical treatment if you are terminally ill or permanently unconscious.
When Should You Create a Power of Attorney?
Many people believe Powers of Attorney are only necessary for older adults or individuals with declining health. In reality, every adult should consider having one.
Once you turn 18, your parents, spouse, or other family members no longer have legal authority to make financial or medical decisions for you. Even if you are young, healthy, and financially responsible, an unexpected accident or medical emergency could leave your loved ones unable to handle your financial affairs or make medical decisions on your behalf.
Creating a Power of Attorney while you are healthy gives you the opportunity to carefully choose who will act for you rather than leaving that decision to a court.
Choosing the Right Agent
The person you choose as your agent should be someone you trust completely. They should be responsible, organized, capable of making difficult decisions, and willing to act in your best interests.
You do not have to choose the same person for both documents. Some individuals are excellent at managing finances, while others may be better suited to making health care decisions. The right choice depends on your family dynamics and your personal preferences.
Planning Before You Need It
One of the most common mistakes we see is waiting until a health crisis occurs before thinking about powers of attorney. Unfortunately, if someone has already lost the legal capacity to sign these documents, it is too late to create them. At that point, a court-appointed guardianship may be the only option.
By planning ahead, you remain in control of who will make financial and medical decisions if you are ever unable to do so yourself. More importantly, you can spare your loved ones from unnecessary legal proceedings during an already difficult time.
At Hickman, Lowder, Lidrbauch & Welch Co., L.P.A., we help individuals and families throughout Ohio prepare comprehensive estate plans that provide peace of mind today and protection for the future. Whether you are creating your first estate plan or updating existing documents, having properly drafted powers of attorney is one of the most important steps you can take to protect yourself and those you love.
Related Resources:
- Estate Planning Isn’t Just for the Wealthy: Why Every Ohio Adult Should Start Now
- Medicaid Planning in Ohio: What Families Should Know Before a Crisis
- Estate Planning for Parents of Children with Disabilities: Protecting your Child’s Future Without Jeopardizing Benefits
- Why a Living Will is Important