A durable power of attorney (POA) enables your elderly parent (called the "principal" in the power of attorney document) to appoint an "agent," such as a trusted relative or friend, to handle specific health, legal and financial responsibilities.
There are two types of power of attorney:
POA for healthcare: Gives a designated person the authority to make health care decisions on behalf of the person.
POA for finances: Gives a designated person the authority to make legal/financial decisions on behalf of the person.
Families should prepare these legal documents long before someone starts having trouble handling certain aspects of life. At the time of the signing, the elderly person establishing a durable power of attorney must be capable of deciding to seek assistance. For example, people in late stages of Alzheimer's disease may not be "of sound mind" and therefore unable to appoint a POA
Like a trust, a durable power of attorney can be written so that the transfer of responsibilities occurs immediately. Or, the POA can state that the POA goes into effect when your elderly parent becomes incapacitated. Until that point, the elder can choose to continue to make decisions on his/her own.
A durable power of attorney is essential because if a person becomes incapacitated or incompetent without preparing this document, family and friends will not be allowed to make many important financial decisions, pay bills or make important healthcare decisions on behalf of their parent. Nor can they do crucial Medicaid planning. Anyone who wishes to undertake these tasks would have to go to court and be officially appointed the person's guardian.
There are several ways that a POA can written, each of which enables the person who is the power of attorney to makes various, and different levels of decisions. For example, the document might say the POA has the authority to pay bills or sell certain assets. Or POA could extend to all financial decisions, including selling the family home, managing all assets, and dealing with the I.R.S.
People often balk at the thought of preparing and signing a durable power of attorney. The elder may feel as if he/she is losing independence, and this may be something that the person doesn't want to acknowledge. An equally fearsome thought is that the agent they appoint will go against their wishes.
It's essential, of course, to choose an agent wisely and to discuss the scope of the responsibility. The document can be revised or revoked at any time, as long as the person who signed it is considered competent. Otherwise, it stays in force until the principal dies. To learn more about the durable power of attorney, speak with a lawyer who has expertise in estate planning.