You probably wouldn’t just sign a blank check and give it to your child and say, “Manage my financial affairs for me.” But that is exactly what happens every day across Virginia as individuals without an estate plan have courts appoint a conservator over an incapacitated adult. They either were the victim of old age, illness, and catastrophic injury. Whatever the reason, they could no longer speak for themselves regarding their financial lives. Without a financial power of attorney established, your loved ones will have to go through a long, expensive court process to establish a conservator.
Then that conservator simply has a blank check to manage your financial life! It’s true. No rules.
At Smith Strong, PLC, we advocate for estate planning to be not mere documents, but planning that provides a rulebook for your financial affairs when you are no longer able to speak for yourself.
Strokes, dementia, illness can strike in a moment. Do not compound the problem without a suitable plan to deal with that transition. Create an estate plan that incorporates a financial power of attorney that is not just a few pages with names of family members, but is a rulebook for them to serve without stress or error.
Virginia Power of Attorney Basics
At its basic roots, a power of attorney (POA) is a document that allows someone to act on another person’s behalf. It is mostly used as a legal element that allows for one person to take action on their parent’s behalf. A POA can be temporary or long lasting and can be used to help ensure that small things get done: like bills getting paid; or that larger things get done: like making important medical decisions. A power of attorney helps individuals to be better prepared to help their elderly parents rather than having to scramble at the last moment when an important decision must be made. It also helps aid the process of opening up a dialogue with elderly parents early to best serve their future needs and what they really want for their future living accommodations, medical care, etc. One of the primary reasons for opening this dialogue early is that POAs cannot be granted if an elderly individual has a condition that makes them incompetent, such as dementia. Opening an early dialogue allows for this to be avoided and provided for sooner rather than later.
Extent of POA and POA Relationship
A POA is a legal document that governs what an individual is or is not allowed to do on someone else’s behalf. This document is negotiated and agreed upon before any legal power is given from one individual to another. For example, a POA document does not give an individual complete power over another person’s affairs, they are only allowed to control affairs to the extent laid out in the POA document. Also, even after signing a POA, an individual’s parent is allowed to act on their own behalf as long as they maintain the capacity to do so and may revoke the POA at any point while still competent.
When a parent signs over a POA to their adult children or another individual, that child/individual then becomes the agent for their parent, who is now known as the principal. An agent has certain responsibilities, with the most important being that they are now a fiduciary. This means that the agent must manage their parent’s (principal’s) affairs to the benefit of their parents and not themselves. This fiduciary relationship is still controlled by the overarching POA document, however it has the added burden of making financial decisions that are beneficial to the parent over themselves.
Types of POAs
There are five different types of POAs that are each used to serve different purposes. The five types of POA are limited, general, medical, durable and springing durable. Limited and general POAs confer a limited or broad amount of rights to the agent depending on the POA document and end when the principal becomes incapacitated. For this reason, limited and general POAs aren’t often used by older adults planning for the end of their life. A medical POA gives the agent the ability to make decisions about the principal’s healthcare and lasts until its revoked or the principal becomes competent again. A durable POA lasts past the point when an individual becomes incapacitated, and is therefore more commonly used by seniors. A springing durable POA is a more specific type of a durable POA that comes into effect when certain criteria are met. These criteria are usually based around when the principal becomes incapacitated.
Some Reasons for a POA
Reasons for setting up a POA vary and are mainly based on an individual and their parent’s needs at any specified time. However, there are some common reasons that a POA can become necessary.
One common reason is financial difficulty. A POA is useful for parents who are having a difficult time staying on track with their financial obligations as it allows the child to easier pay their parent’s bills and manage their finances.
Another common reason for a POA is chronic illness. It can be helpful to arrange a POA for a parent with a chronic illness because it allow the child to manage all the logistics surrounding their parent’s health while also allowing the parent to focus solely on their health. A POA centered around medical care can also allow a child to make medical decisions for their parent while they are under anesthesia or recovering from a major surgery.
Memory impairment is also a common reason that a POA is sought. It is sometimes best for a child to manage their parent’s affairs when their parent is dealing with a disease like Alzheimer’s or dementia. However, in these instances the POA paperwork has to be signed while the parent still has their mental faculties.
Setting up a POA
When you’re ready to set up a POA for yourself, give us a call at 804.325.1245, or attend our free estate planning workshop! Being prepared for a possible, future incapacity will save your family time and money later in a guardianship and conservatorship hearing.
If you're an adult child with concern for your elderly parent, there are several steps that should be taken:
The first step is to open up a dialogue and talk to your parents. An open and healthy discussion about what they would need in a POA and what their wishes are when it comes to their finances and healthcare is the best way to start this process. It is key to come from a genuine place of love and care here as the parents must consent and agree with everything the POA entails.
The next step is to talk to a lawyer, if in Virginia, we at Smith Strong law firm are happy to help. Each individual POA is different and has different requirements. Talking with a lawyer about concrete steps to take and the laws around POAs in your state is essential to get the ball rolling for setting up a POA. A lawyer can then help you create and set up the necessary documentation surrounding the POA. The lawyer can help ensure that the POA documentation has all the necessary provisions and ensures that your parent’s wishes are known and included in the document.
The last step is to sign and notarize the POA document, effectively executing it and making it valid. Ask your lawyer for notarization requirements as these can also be state law specific.
POAs can help give a child and their parents a peace of mind that their livelihood and affairs are in good hands in case of an emergency. It is better to get ahead of this rather than waiting for the moment an emergency arises, because it is often too late at that point.