The Most Powerful Estate Plan includes Powers of Attorney
Why establishing powers of attorney is the best thing you can do for your estate plan.
An estate plan is way more than a will.
When many people think about estate planning, they think about a will.
While speaking to new clients, I’ve learned that many people seem surprised that an estate plan is actually a collection of legal documents that work together to effectively transfer your property to the next generation. And, really, a thorough estate plan does even more than that, it provides security that you will be taken care of even if there comes a point where you can no longer take care of yourself.
An effective estate plan includes (but is not limited to):
a will and/or trust
property deeds and titles
insurance policies
account information
banking information
personal financial inventories
powers of attorney
Here are some estate planning facts that you should know:
Only 32% of people in Louisiana have a written will.
What this tells us is that most people are severely underprepared for the inevitable process that comes with the passing of a loved one.
I encourage anyone in Louisiana reading this, regardless of your age, to make sure that you at least have a valid handwritten will by the time you go to sleep tonight.
An estimated 85% of adults nationwide do not have powers of attorney.
The next thing you should do is make sure you establish powers of attorney.
One of the most important documents in your estate plan, a power of attorney is a contract that gives a designated person the power to make financial decisions, and health-related decisions, and generally manage your affairs, should you become incapacitated, incompetent, or otherwise disabled.
As per usual, Louisana does things a little differently.
While only lawyers really use these technical terms, I always want to give you insight into Louisiana estate planning. So, a Louisiana power of attorney is sometimes referred to as a “mandate” in Louisiana law. Instead of ‘agent’ or ‘attorney-in-fact’, the person designated with the power of attorney is technically the ‘mandatory’ in Louisiana law. The person granting the authority is called the ‘grantor’ or ‘principal’.
In this blog post, I’m going to stick to language that is both accurate and easy to understand. If you have any questions about the power of attorney content below, be sure to reach out to me anytime! I am here for you and your estate planning needs. .
Need to ask specific questions about your situation? I’m here for you.
The Main Types of Powers of Attorney:
General or Limited
A general power of attorney typically attempts to give broad authority to allow you to name a person or persons who will make decisions for you on a variety of matters.
You can have a general power of attorney that includes the ability for someone to make all financial and healthcare decisions for you.
I prefer to separate these powers into 2 documents because I don’t think your bank needs to know about your health nor do your doctors need to know about your finances.
While you can give certain broad grants of power to people, the following powers have to be expressly written in the document to be effective:
Make a donation to a new or existing trust
Impose conditions on a donation
Accept or renounce a succession
Take out a loan or acknowledge or cancel a debt
Sign promissory notes and other negotiable instruments
Make health care decisions, such as surgery, medical expenses, nursing home residency, and medication
Prevent or limit reasonable communication, visitation, or interaction between the principal and a relative by blood, adoption, or affinity within the third degree, or another individual who has a relationship based on or productive of strong affection.
A limited power of attorney grants a very specific and narrowly defined authority to a designated individual.
Typically, these are more specific than the financial or healthcare power of attorney.
A limited power of attorney is a document that typically gives someone the ability to act for you for a certain limited duration.
The most common limited power of attorney is giving a realtor a power of attorney to sell a house. I sold a house out of town 2 weeks after giving birth to my first child and had to give a limited power of attorney to my realtor to go to closing.
A limited power of attorney can be helpful for someone who wants a specific person, say a business partner, to handle certain affairs prior to their death.
Financial and Healthcare (or Medical)
A financial power of attorney designates someone to specifically make financial decisions on your behalf.
While there are scenarios in which certain authorities and tasks can be specified for this designatee, in general, a financial power of attorney will take care of some or all of the following:
Make donations or carry out philanthropic actions that you require.
Initiate or finalize trusts according to your instructions.
Buy and/or sell the property specified by you.
Pay bills, expenses, and/or debts on your behalf.
They may be able to enter into legal contracts and/or agreements on your behalf.
Have access to your financial accounts, including checking, savings, investment, and/or retirement accounts.
A healthcare power of attorney gives authority to someone to make decisions concerning your healthcare on your behalf.
This can be the same person designated as your financial power of attorney, but it can also be a different person named in this specific document. A healthcare power of attorney can grant someone the authority to:
Arrange your care through hospitalization, retirement communities, hospice, and/or home treatments.
Access all of your health information. This person will be able to discuss your condition with healthcare providers.
Consent to or refuse medical treatments or any medical procedure according to your specifications, like a DNR.
Durable or Not Durable
A durable power of attorney remains in effect if you should become incapacitated.
If the power of attorney is not durable, it would cease to become effective if you are incapacitated or unable to make decisions for yourself.
In reviewing documents from some of the larger legal template providers, I’ve noticed that they don’t really tell you what’s important. For example, you need to write a provision that the power of attorney is durable if you want it to be effective even if you are incapacitated.
I view the power of attorney as being a protection from having a court appoint someone to care for an adult who is no longer able to care for themselves. This is a necessary provision to include in a general power of attorney.
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Springing or Immediate
A springing power of attorney springs into effect once certain conditions are met.
If your power of attorney states that it does not become effective until two physicians have certified your disability, then it does not become effective until this condition is met.
Personally, I prefer a power of attorney that is effective immediately. Otherwise, in order for the power of attorney to take effect, you’ll need to find 2 doctors to certify the disability. This path is time-consuming, expensive, and unnecessary in most cases.
These powers can still be revoked at any time.
An immediate power of attorney grants the agent with full or specified authority immediately upon the contract’s finalization.
These powers can still be revoked at any time.
If you’re not sure which of these methods applies to your situation, schedule a strategy session with me and we’ll take a look at the options that are available for you specifically.
Plan Today for Peace of Mind Tomorrow
Best Practices for Powers of Attorney
While you do have the option to designate more than one person with the power of attorney authority, it is not always recommended.
Instead, generally speaking, it is typically best practice to grant 1 person the power of attorney, then establish backup persons to fulfill the duties, should the original be unable to do so.
It is important to consult with an estate planning attorney so that you can get a professional analysis and recommendation according to your specific needs.
Typically, in my Louisiana estate planning practice, I’ll draw financial and medical powers of attorney as two 2 different documents.
This is common practice because I don't think your bank needs to know about your health nor does your doctor need to know about your finances. This is a discussion that I commonly have with my estate planning clients, and a conversation I recommend anyone have with their own estate planning lawyer.
In terms of financial power of attorney, I think it’s important to grant the agent the power to make donations on your behalf. This can be important for Medicaid spend-down purposes or if you’re wanting to establish a charitable remainder trust.
If you’d like to know more about specific Medicaid estate planning practices or charitable remainder trusts, go ahead and schedule a strategy session with me as soon as you can.
It’s important that you get a licensed estate planning attorney to review your specific needs in order to get the best advice on either of these estate planning options.
It’s always a good time to plan for your family’s future.
What happens if I don’t have a Power of Attorney?
Without a power of attorney, should you become incapacitated or disabled, your family and loved ones will have to go to court in order to establish this authority.
This court proceeding is known as interdiction.
Through interdiction, a judge will determine who should be granted the authority to make financial and medical decisions for you. In order to go through this process, your family will have to file a petition to the court and hire an attorney which will almost always cost more than the initial fee to establish your estate plan now.
Having powers of attorney is incredibly important.
Think about it: what you can do in one hour this week would take your family weeks and cost them hundreds of dollars to achieve down the road.
In Louisiana, it is valid to have a handwritten will. However, a power of attorney should be drafted and reviewed by a licensed attorney in your state. Schedule a strategy session with me, to make sure your estate plan includes this important document.
Keep this in mind about Powers of Attorney
Without a power of attorney, should you become incapacitated or disabled, your family and loved ones will have to go to court in order to establish this authority.
This court proceeding is known as interdiction.
Through interdiction, a judge will determine who should be granted the authority to make financial and medical decisions for you.
In order to go through this process, your family or loved one will have to file a petition to the court and hire an attorney which will almost always cost more than the initial fee to establish your estate plan now.
Having a power of attorney is incredibly important.
Think about it: what you can do in one hour this week would take your family weeks and cost them hundreds of dollars to achieve down the road.
While in Louisiana, it is valid to have a handwritten will, I don’t advise that for powers of attorney.
You’ll probably want a power of attorney contract that is signed in front of a notary and two unrelated witnesses who are not going to be your agent/mandatory in the power of attorney. Doing so is your best bet in ensuring the validity of your arrangements down the road.
This is also the necessary process to transfer real estate in Louisiana. Note that any power of attorney contract must comply with the formalities for the underlying transaction to be effective.
So, if your power of attorney is signed in front of a notary and two unrelated witnesses neither of which will be your agent, then you are golden from a legal perspective in Louisiana.
Schedule a strategy session with me, to make sure your estate plan includes this important document.
Keep this in mind about Powers of Attorney
It is far too common for an issue concerning the power of attorney to be discovered once someone has become incapacitated.
Once this occurs, they will be unable to amend the power of attorney which typically results in court intervention and the family going through interdiction.
Typically, this would include the selling of real estate, the establishment of trusts, and/or the making of donations on your behalf. If you have questions about specific authorities you want to grant in your power of attorney documentation, then schedule a strategy session with me today.
By having a licensed estate planning lawyer formally review your power of attorney documents, you are doing everything possible to ensure the effectiveness of your power of attorney documents.
If you have questions about specific authorities you want to grant in your power of attorney documentation, then schedule a strategy session with me today.
There is no crystal ball when it comes to estate planning. To design an effective estate plan, you are doing everything in your power to prepare yourself and your loved ones for the inevitable unknown.
One of the most powerful ways to create a strong estate plan is by establishing powers of attorney as soon as possible. If you’re ready to make a strong estate plan in Louisiana, I’m here for you. Schedule a strategy session with me today.
Happy Planning!
Take Care,
Addie
Are you ready to create an estate plan that’s right for you?
FAQ
Q: What is a power of attorney?
A: A power of attorney is a document that gives someone the power to act on your behalf if you are unable to do so. Now you can give a power of attorney even if you are competent. Probably the most frequently used limited power of attorney is to allow your real estate agent to sign the documents to sell your property if you are out of state.
Q: Why is it so important to have a power of attorney?
A: If you become incapacitated or incompetent, someone will have to go to court and apply to be named your guardian. In Louisiana, this is called an interdiction proceeding and the person named your guardian is called a curator.
A power of attorney allows you to give the power to handle your finances and healthcare to someone else so that you don’t have to go through that interdiction proceeding.
Q: Will you be able to give me legal advice during a strategy session?
A: Yes! Booking a strategy session means that we will be able to discuss your situation specifically. Please note that scheduling a strategy session does not automatically make you a client of Addie Prewitt Law.
Once we’ve completed the 60-minute strategy session, I will send you a proposal for my estate planning services. This document will include pricing information, a review of our conversation, and any other specifics that we discussed in the meeting.
Please note that any content shared outside of the one-on-one strategy session and our lawyer-client relationship is not legal advice. This blog post and any other blog post or informative content are tools of general information and are not legal advice.
If you’re looking for specific feedback on your situation, I highly recommend scheduling a 60-minute strategy session with me. You can find out more information and book yours here.
Q: Which documents will I likely need to create a complete estate plan?
A: It can vary from client to client, but generally, folks looking to make an estate plan can count on needing some, if not all, of the following documents:
Last will and testament
Living trust
Beneficiary designations
Financial power of attorney
Advance healthcare directive/healthcare power of attorney
Insurance policies (health, life, car, home, etc.)
Titles and property deeds (car, home, boat, rental property)
Proof of identity (social security card, prenup agreement, birth/marriage/divorce certificates, etc)
Digital logins and passwords (yes, all of them)
Funerary instructions (although I believe these should be given directly to your loved ones prior to your death.)
Take a look behind the legal curtain.
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Regardless of what you already have in place (or not), if you don’t already have a power of attorney set up, then that should be your next step.
This is an often overlooked and misunderstood document that could save you and your loved ones a lot of stress when life serves up it’s favorite dish: the unexpected.
A quite note before we get started: a power of attorney document is not exclusively for estate planning. However, a successful estate plan always includes a power of attorney.