Before we get into the importance of having powers of attorney, let’s define some key terms.
Power of Attorney – A power of attorney (POA) is a document that states a person or organization you name to act on your behalf in regards to handling financial and business transactions. Unless the POA is durable, it becomes invalid if you become incapacitated. For example, a non-durable POA may be used to grant someone the power to close on real estate in your name if you’re out of the country. A durable POA gives someone the power to make financial decisions on your behalf even if you become mentally or physically incompetent.
Healthcare Power of Attorney (also referred to as Medical Power of Attorney) – A healthcare POA is a document that states a person you name who has the authority to make medical decisions for you if you are unable to do so, for example if you’re unconscious or mentally incapable.
Living Will – A living will is a document that states your medical care wishes should you become incapacitated or seriously ill and you cannot communicate your preferences.
A Last Will and Testament – A last will and testament, simply known as a will, is a document that states what you wish to have happen to your assets after your death. This document also states who you wish to become guardians to your children (or even pets) if you have them.
These four estate planning documents are all important and it’s a smart move for you to have all four in place. Let’s first get into the most useful type of power of attorney for retirement and estate planning: durable power of attorney.
The Advantages of a Durable Power of Attorney
First and foremost, the proper execution of durable power of attorney can help to avoid the costs, delays, and emotional distress of mental capacity evaluation proceedings.
Second, you don’t have to risk the court appointing a conservator or guardian that may not be in line with your wishes.
Third, activities and transactions occurring via a durable power of attorney are kept private. With a court-appointed guardian, court supervision is part of the deal and actions taken on behalf of an incapacitated person are recorded and can be accessed by the public.
Executing a durable power of attorney is relatively inexpensive and the forms are standard and simple.
The Importance of a Healthcare Power of Attorney
Your healthcare is a very private matter. Wouldn’t you rather make your own medical decisions versus someone else doing it for you should you become incapable?
A living will and healthcare power of attorney work well together. In a living will, you describe your wishes for medical treatment in the event that you are unable to express them yourself.
- Would you prefer life-prolonging treatment regardless of your quality of life?
- Would you prefer doctors to withhold treatment if you couldn’t feed yourself?
- Would you want a respirator but only up to a specific period of time?
- Would you want your body donated to science?
These are just some of the things you can address in a living will. To clarify, a living will is different than a last will and testament. A living will deals with your health wishes while still living. A will states what you wish to have happen to your assets when you die. It’s not one or the other, you should have both.
If you’re over the age 18, have no healthcare POA, and suddenly become incapacitated, typically doctors will reach out for health care decisions to family and friends in the following order:
- Adult children
- Close family friends
- Guardian of the estate
This may cause family strife if your loved ones don’t agree and courts may get involved which can be emotionally and financially draining and time-consuming.
What is a health care agent?
A trustworthy person with your best interests at heart is ideal when choosing a health care agent—this is the person who carries out the healthcare power of attorney.
While your living will states your wishes, it is only put into effect if you have been medically determined to be in a permanent vegetative state or terminally ill, and therefore unable to communicate medical preferences. Your health care agent can make medical decisions on your behalf even if you do not fall into that category. For example, if you have Alzheimer’s and become mentally incompetent your health care agent becomes your healthcare decision maker.
Oftentimes people name the same person to be both their healthcare power of attorney and general durable power of attorney, but this isn’t required. If you pick two different individuals for these roles, it’s important that they see eye-to-eye. One is in charge of your health care decisions and the other is in charge of your finances and these need to coordinate.
For example, say you have Alzheimer’s and your health care agent believes you would want to have in-home 24-hour care, but your power of attorney refuses to pay for 24-hour care and believes a nursing home to be a better choice. Now what? If they can’t come to terms, they will need to go to court to figure it out.
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Lack of Estate Planning Can Create Chaos
You may remember the Terri Schiavo case from the 90s. Schiavo was in her home when sudden cardiac arrest occurred. She was successfully resuscitated but was left comatose. The doctors who examined her believed she would never emerge from her coma. Her husband wanted her feeding tube removed to allow her to die since she was in a permanent vegetative state. Schiavo’s parents disagreed and a court battle begun. This federal court case would even reach President George W. Bush.
For over 15 years, Terri Schiavo was kept on life support as her parents and husband disputed what should happen to Terri. Terri’s husband believed Terri would not want to be kept alive in such a state. Terri’s parents believed she would have wanted to live by any means necessary.
They had to guess because Terri Schiavo had no living will nor a healthcare power of attorney. In March 2005, Schiavo’s feeding tube was finally removed for a final time.
The Schiavo case is just one of many in which families are torn apart because a loved one dies without having the proper planning documents in place.
How to Get a Living Will and Healthcare Power of Attorney
If you’re over 18 and considered of sound mind, you can create both documents. While it’s preferable to hire a lawyer to create both to ensure you don’t miss anything, it’s not required. Many lawyers will charge one flat fee to prepare both documents but this fee can vary anywhere from $300 to over $1000.
In lieu of hiring a lawyer, you can create both a living will and healthcare power of attorney yourself online. There are many reputable companies that offer these services online at a reasonable cost such as LegalZoom, Rocket Lawyer, and Giving Docs. The state you live in will have its own forms. These forms will need to be signed in front of witnesses and most states require them to be notarized as well.
Five Wishes is another type of document that states end-of-life desires. It was created by Aging with Dignity, a non-profit organization.
The intention of Five Wishes is to give seriously ill individuals a way to express their end-of-life wishes and to provide guidance for their loved ones. It’s written in everyday language to make the understanding of it and carrying it out much easier and less stressful.
The areas covered by the Five Wishes are:
- Choice of health care agent,
- Medical treatment desired or not wanted,
- Care and comfort wishes,
- Personal treatment,
- Wishes for loved ones to know, including funeral and disposal of the body.
Five Wishes is used in all 50 states and in countries around the world. It meets the legal requirements for an advance directive in 42 U.S. states and the District of Columbia. In the other eight states your completed Five Wishes can be attached to your state’s required form.
Five Wishes is a revocable and changeable form. Once it’s signed and witnessed, it is a valid legal document in those states that recognize it. Executing Five Wishes invalidates a previously executed advance medical directive or living will that may have existed.
Don’t postpone getting these documents in place. Your life can change drastically at any moment. Be sure to discuss with your health care agent of choice before drawing up the documents and make sure they understand your wishes and their responsibilities.
» Learn more: A Basic Estate Planning Checklist
About the writer
Natasha Cornelius, CLU
Senior Editor and Licensed Life Insurance Expert
Natasha Cornelius, CLU, is a writer, editor, and life insurance researcher for Quotacy.com where her goal is to make life insurance more transparent and easier to understand. She has been in the life insurance industry since 2010 and has been writing about life insurance since 2014. Natasha earned her Chartered Life Underwriter designation in 2022. She is also co-host of Quotacy’s YouTube series. Connect with her on LinkedIn.