This is part 2 of our estate planning mini series. If you have not checked our part 1 yet, do so now!
On this post we invited our preferred Attorney, Andrew M Ayers. If you would like to connect with Andrew or are looking to setup an entity you can contact him directly here.
Here is a guest post from Andrew M Ayers:
When most people come to meet with me for an estate plan, they are focused on their Last Will and Testament (the document that says what happens to your assets and your family after you die). While this is the central document that may be on your mind, there are other documents that also work with your will to create a full plan, your estate plan. The documents that you need to make sure you’ve also created are called “Powers of Attorney” and they are designed to give someone else the power to make decisions for you. There are two primary types that we work with:
While your will takes over when you’ve died, these documents are effective while you are alive and expire when you die.
Financial Power of Attorney
A financial power of attorney is designed for someone to make financial decisions for you. Normally, it has a list of “powers” that you are granting to someone and you have the choice of granting all of the powers or choosing only some powers. If you’ve purchased a house and weren’t able (or didn’t want to) attend the closing, you may have filled out a power of attorney granting someone else the power to sign on your behalf at the closing. Or if you work with a financial advisor, they may have a form they want you to fill out for their records that allows them to consult with someone else regarding your financial decisions if you are unable to do so.
Signing Your POA
Your power of attorney needs to be notarized and in some states, it also needs to be witnessed, so you should check with your local state to see what is required. Many states will also have provisions that allow for your agent (the person you are giving the power to) to sign the document as well so that there is a specimen of their signature to compare to.
When it is time to sign, there are some mistakes that I commonly see:
- Not checking the right boxes for the right powers you want to grant;
- Not signing the document in the right places; and
- Not getting it notarized.
These seemingly “small” mistakes can be a very big problem and could mean that your power of attorney is invalid, so don’t make these mistakes.
Where Do You Get One?
Normally, I am not a fan of people downloading forms from the internet. However, in this case, your state likely has a standardized form that is designed for you to download and sign. So if you do a quick search, you can likely find the form you’ll need. If you are working with a financial advisor or your bank, they may have their own versions of the form that they would like you to use – but be careful: their form may not be accepted by other organizations.
What Do You Do With It When It’s Signed?
Once you’ve signed the Power of Attorney, keep it with your other important documents. Your family members should know where it is in case it is needed and it’s also a good idea to have a copy given to your financial advisor and other important members of your financial team. If you don’t have one already, you should also make sure you have a list of the important financial members of your team so that your family knows who to contact.
Healthcare Power of Attorney
The other type of power of attorney that you need to know about is a Healthcare Power of Attorney. Like a financial power of attorney, it also has a list of powers that you are granting to someone when it comes to your medical decisions. Unlike the financial power of attorney, it tends to be more “in-depth” and provides more guidance for your agents as to what you want to have done with your health decisions.
Your state likely has a basic healthcare directive of some type on its website, but this is an area where it’s important to work with a professional so you know what you are signing and that you understand it. You are giving someone else immense power to make medical decisions and it’s important that you are clear on what you do and do not want.
What’s in a Healthcare Power of Attorney?
A Healthcare Power of Attorney is often much longer than a financial power of attorney. Some common provisions that you will find:
- Identifying your agent (who will make medical decisions);
- Access to your medical records;
- Decisions regarding long-term or hospice care;
- Decisions regarding keeping you in your home if you’re sick;
- Decisions to admit you to a psychiatric facility;
- The ability to hire healthcare aides;
- Using medicine for pain relief;
- Whether they can perform an autopsy on your body and what to do with your remains;
- Reimbursement of expenses for your healthcare agent;
- A universal declaration that it can be used in any state (so it’s not limited to your state like the form you may get from a website); and
- Your power to revoke the document and under what terms you can do that.
Signing Your Healthcare Power of Attorney
Your Healthcare Power of Attorney is signed like your will, with witnesses and a notary present. You’ll want to make sure you keep the original with your other estate plan documents and keep it available in case your loved ones need access to it. When you are working with an attorney, they should also provide you with a client portal that allows you to access your important documents in electronic format.
Your Healthcare Power of Attorney usually has a provision for access to medical records. As a matter of good practice, I like to also provide clients with a separate HIPAA Authorization just to make sure that the agents have full access to medical records to make decisions. Unlike your Healthcare Power of Attorney (or your financial power of attorney), a HIPAA Authorization can actually survive your death and allow your loved ones with access to your medical records after you’re gone. This can be important if there are any issues surrounding your death and your family needs to speak to an attorney.
Mistakes to Avoid
When it comes to a Healthcare Power of Attorney, there are five common mistakes you’ll want to avoid:
- Not being clear about your wishes;
- Not talking to your agent about your medical wishes;
- Not choosing which powers you’d like to grant to your agent;
- Not giving copies to your doctors; and
- Not signing it correctly.
You can download Andrew’s personal planning checklist here.
Finally, I highly recommend you sign-up for our Tax Minimization Program (w/ Stress-Free Bookkeeping Training) as not only will you get a bunch of in depth training, templates, group coaching but you also have unlimited access to our team for general tax and accounting questions.
How sweet would it be to have an accounting professional by your side for those questions that pop up in this crazy journey of being a business owner?
We also have a complete module on these topics from Andrew M Ayers!
This is an add-on to our discussion last week, How Can I Setup My Business for Success in 2023? If you haven't checked that out yet, do so now. We discussed: Take Bookkeeping Seriously: Update it regularly, no commingling, and keep your receipts/documentation Start...