The most important element of a strong plan is the foundation.
When building a home, due care is taken to ensure the foundation supports the structure. Similarly, a strong foundational estate plan is necessary for all competent individuals over eighteen years of age. This foundation can be built upon throughout an individual’s life as additions to their family are made, as wealth is accumulated and as an individual defines the legacy he or she wishes to create.
A foundational estate plan includes:
- Powers of Attorney for Property (POAP) and Healthcare (POAHC)
- Last Will and Testament
- Revocable Living Trust
This column focuses on Powers of Attorney while the next month’s column will tackle a Will and Revocable Trust.
A Power of Attorney creates an agency relationship in which an individual, the principal, designates someone to make decisions on their behalf, the agent. The agent’s responsibility can begin today or at a future date, often when the principal is unable to make decisions for one reason or another.
In a POAP, the principal appoints an agent to make financial decisions. In a POAHC, the principal appoints an agent to step into his or her shoes and make healthcare decisions when they are unable to do so. The Power of Attorney itself outlines an agent’s authorities, which can be very broad or limited based on the principal’s wishes.
While Illinois law provides for a standard form for both POAP and POAHC, an experienced estate planning attorney brings tremendous value to tailoring the document to a client’s goals and objectives today and into the future.
With great power comes great responsibility and as you can imagine, appointment of the right individual is essential. It is also very important the agent knows of the appointment and, especially in the POAHC, understands the principal’s wishes when decision time comes.
When I work with my clients on a POAP and POAHC, I dedicate time in our conversation to ensure they (1) appoint the right individual and (2) carefully outline the authorities granted to that individual.
While creating a plan for the passing of your wealth at death is often the main focus of an estate planning consultation, decision-making when you are alive before you are unable should be at the heart of the conversation as well.
