06 Mar Enduring Power of Attorney – what is it, and why is it so important to financial planning?
The power of attorney gives a person the ability to give control over their financial and physical well-being to another individual that they choose. The individual who is giving out the control of their finances and other items is called the principal while the person placed in charge is called the attorney. The reason a principle would create and sign off on the power of attorney is so that someone can take care of their estate if they were ever unable to do so because they are traveling, absent, or ill.
Defining enduring power of attorney:
Power of attorney is an umbrella term for many other more specific concepts within the idea of giving someone the ability to take care of matters if you are unable. The one that is considered most important is the enduring power of attorney. This gives the principle the ability to give an attorney specific power and guidelines for how they want their estate to be managed if and only if the principal becomes incapacitated or loses the ability to rationally make decisions on their own. With all this being said research has shown that over 80% of people have not even talked about their wishes and guidelines in the event they were no longer able to take care of themselves. Of that 20% that have spoken about it, only 5% have written down their wishes and signed a document giving enduring power of attorney.
Setting up enduring power of attorney is not something that you should wait about doing. This can be done by any adult at any time. It is impossible to predict what is going to happen in the future so having this set up no matter your age is very important. When setting this up there is no need to worry either as the enduring power of attorney does not give anyone power until you are deemed by a doctor you have lost your mental state or are incapacitated.
There can be very serious repercussions if you do not have enduring power of attorney in place and become incapacitated.
- The only way that someone would be able to get the ability to take care of your estate is through the courts. This is a much longer process as well as much more expensive.
- The person the court appoints may not be a person you want or trust to be taking care of your estate.
- Leaving everything up to the court can cause tension between family members over who is going to be the one who receives the power from the courts to manage the estate.
Within your estate and one of the biggest reasons enduring power of attorney is so important is the principal person’s medical wishes. Having someone you trust in charge of you and having the ability to layout your specific wants is incredibly important. If you wish to be treated in your home but do not specify that and give someone power of attorney in most cases you will be taken to a nursing home. That is why having someone in charge of your health and well-being through the enduring power of attorney is important. This person will know your requests and by law is required to follow them.
It is very important when a principle has decided to write and sign a document giving someone enduring power of attorney that they take time to stop and think about what they want in the future. The wishes written in the document must be followed by whomever the attorney is. An example would be to specify how you wish to be cared for when you are older. That could be to stay at home and have a nurse come to the house every day or the choice to go to a nursing home. They can even be as specific as to say which nursing home they wish to stay at when they get older.
The idea can seem very scary to be signing off on giving someone full power over your finances as well as your care. This is a common issue people run into when they are first considering setting up enduring power of attorney. However, there are so many ways you as the principle can put restrictions on what happens.
- Be very specific about your wishes when preparing the documents.
- Assign control to different people if there is not one person who is capable of covering all aspects of your life from finances all the way to taking care of your personal health and future.
- Specify that you want the actions of the controlling person to be checked regularly by an outside expert to insure that they are only acting in your best interest and are following your wishes.
To summarize setting up enduring power of attorney is incredibly important. Doing so prevents a long court process and other issues from arising if you, the principal, became unable to manage your life. There is the ability to be as specific about your wishes as you would like. The principle can put checks on whomever they appoint as their attorney through outside experts. These things are all important but the most important thing to realize is that the main purpose of setting up enduring power of attorney is to ensure the principle’s wishes are carried out no matter what happens in the future. You will most likely execute this arrangement with your solicitor in the same way as making and updating your will, and while these matters are legal steps, they are essentially a very important part of good all round financial planning for your future.