Good to Know
The same incapacity management techniques that address mental illness issues can also be effective when your client is temporarily incapacitated due to physical illnesses such as COVID-19. Here is a quick review of these documents and how they work.
Power of Attorney (POA)
This legal document empowers another person to act on your behalf. If that sounds a bit ominous, that is because the prospect of ceding control over our finances or health care can be intimidating. But fear not, the vast majority of clients can be effectively served by selecting the appropriate POA for their individual needs.
A POA has two parties. The person giving away power is the principal and the person to whom power is granted is the “attorney-in-fact.” You do not need to be an attorney to be an attorney-in-fact. All POAs terminate at the death of the principal.
The discussion that follows will illustrate the four primary types of POA.
- General Power of Attorney
This POA is comprehensive and empowers the attorney-in-fact to exercise most of the legal powers and rights of the principal.
- Limited Power of Attorney
The word “limited” appeals to many clients. For example, this POA can be effective only for a specific event such as signing a contract while the principal is out of the country. A Limited POA terminates upon the completion of the event.
- Durable Power of Attorney
A principal may use a Durable POA to delegate to an attorney-in-fact the power to transact financial affairs or manage medical treatment in the event of the principal’s incapacity; this POA includes specific language making it valid only during the principal’s incapacity. From a legal perspective, a Durable Power of Attorney endures (remains effective) beyond the principal’s incapacity. Noteworthy – A Durable Power of Attorney can be structured as either a General POA or Limited POA.
- Springing Power of Attorney
The Springing Power appeals to clients who place a high value upon maintaining control over their financial and medical decisions unless a predefined “incapacity trigger” is pulled. For example, a client’s Springing Power of Attorney could become effective (spring to legal life) only when three physicians confirm the client’s incapacity.
Because state laws may differ, your client should consult local, experienced legal counsel to choose the most appropriate Power of Attorney.
Stay tuned for our next blog to find out how revocable trusts can be designed with incapacity management strategies.