Estate planning can be a problematic and multi-faceted undertaking. It requires an individual to make a number of difficult decisions regarding their finances as well as their future health care needs. Every individual situation is unique, and there is no one-size-fits-all regarding estate planning. We’re going to take a look at two key components of the estate planning process: a power of attorney (POA) and a health care proxy (HCP).
What is a power of attorney?
A POA is a trusted party that you name to oversee your finances and act in your stead should you become physically or mentally incapacitated. In general, a POA has access to all of your financial information, including bank accounts and other valuable assets. They can use your funds to pay recurring bills, settle outstanding debts, deal with insurance issues and settle matters related to taxation. They can also sell your property, including real estate and personal items, should the need arise.
Establishing a POA
Every person has the right to name their power of attorney. POA forms are readily available for download and are generally standardized across US states. While the process is fairly straightforward, you can not complete a POA alone. A notary’s presence is the bare minimum required. Due to the significance of this document, some people also choose to consult with a legal representative to navigate any questions.
What is a health care proxy?
A health care proxy is someone you name to handle medical decisions in the event that you become physically or mentally incapacitated. A health care proxy is responsible for communicating your health care wishes to your provider if you are unable to.
Establishing a health care proxy
Establishing an HCP is easier than a POA. Forms are readily available for download via state websites, at your physician’s office, and at the hospital. All that is required is to is name a primary HCP, a backup proxy, and then sign the document in the presence of a third party. If you come disabled in some capacity, your HCP will become the primary decision-maker of your health care choices. While the proxy is expected to act according to your wishes, it should be noted that there are backup documents that can clarify any gray area, including a Medical Orders for Life-Sustaining Treatment (MOLST) form and a living will.
Which one is right for me?
Every individual’s needs are different. That said, an HCP takes care of all health-related decisions, while a POA is responsible for decisions that fall within your financial realm. It is often advisable to establish both during the course of your estate planning activities.