Powers of Attorney: Unraveling the Mystery

powers of attorney and living will

by Kelli Y. Allen, Elder Law Attorney 

There is a great deal of confusion surrounding powers of attorney. A properly executed power of attorney allows you to grant another person the authority to act on your behalf if you become incapacitated. There are two types of powers of attorney: financial and healthcare. Another related document is a Living Will, also known as an Advanced Directive or Declaration for a Natural Death.

Financial – Durable Power of Attorney

A financial power of attorney appoints another individual or individuals as your agent. When the power of attorney document is drafted, you determine the amount of areas of authority your agent will have. Your agent will then be able to handle your financial affairs while you are unable to do so.

North Carolina provides a statutory short form power of attorney document that many people use, believing it to be sufficient. However, the statutory form and online “do-it-yourself” forms do not address many important issues, and people are often very surprised to find that their power of attorney is not as expansive as they believed it to be.

First, it is important that your power of attorney be a “durable power of attorney.” A power of attorney that does not include the “durability” language is effective only so long as the person executing it remains competent. Since most people execute a power of attorney specifically in case of incapacity, they are quite surprised to hear that their document actually may not serve that purpose. By ensuring that your power of attorney is “durable,” your agent will still have the authority to act on your behalf if you become incapacitated.

Secondly, it is vital that your power of attorney explicitly grant your agent each power that you wish him or her to have. For example, does your document allow the agent to write checks from your bank account but not open a new account? Does your power of attorney allow your agent to create and fund trusts to protect your assets? Most do not. It is not enough to make a general statement that you give all power allowable under the law. Unless the power is expressly stated, most likely, it is not authorized under your power of attorney.

Next, in North Carolina, for your power of attorney to be effective after you become incapacitated, it must be registered with the Register of Deeds in the county where you or your agent reside.

Additionally, North Carolina requires your agent to provide accounting and inventories to the clerk of court. This means that your agent must submit financial records documenting all transactions made on your behalf and work with the clerk of court in handling your financial affairs if you become incapacitated.  This requirement can be waived, but your power of attorney document must explicitly waive that requirement. Otherwise, your agent will be burdened by the statutory accounting requirement.

An elder law attorney can be sure that your financial durable power of attorney is as expansive as necessary, thereby giving your agent the necessary authority to handle your financial affairs during your incapacity.

Healthcare Power of Attorney and Living Will

A healthcare power of attorney and a living will are inter-related, but are different documents. You may choose to have either or both, depending on your objective.

A healthcare power of attorney appoints another individual who is authorized to make medical decisions on your behalf if you are unable to do so. If you are unable to speak for yourself, your healthcare providers will take instructions only from your designated representative. Therefore, it is very important that this person be someone who knows you well, would be in a position to determine what your wishes would probably be, and would take this responsibility seriously.

Without a healthcare power of attorney, laws determine who can make these decisions. If you are married, this person is automatically your spouse. However, if another person, such as parents or children, believe a different healthcare decision should be made, this would require court intervention. A healthcare power of attorney avoids that issue.

A living will, also referred to as an advanced directive, is a document that specifies what treatment you do or do not wish to receive under certain situations. This may include whether you wish to be placed on life-support, be resuscitated, or receive palliative care. If you are unable to speak for yourself, your healthcare providers will follow the instructions contained in the living will. However a living will cannot anticipate all possible medical scenarios, and controls only the issues addressed in that document.

If you have both a healthcare power of attorney and a living will, your representative will make medical decisions on your behalf, but will be bound by the conditions stated in your living will. Thus, this option provides your direct instructions for many healthcare situations while simultaneously designating an individual to make any other medical decisions when you are unable to state your wishes.

Summary

All adults, regardless of age or physical and mental condition should seriously consider executing each of these documents. Doing so ensures that the individual(s) you select is the person making decisions on your behalf if you become incapacitated. Additionally, having properly executed powers of attorney and a living will reduces stress and tension for family members and avoids the need for costly and time-consuming court actions.

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