Caring for a loved one often means taking on their transportation to appointments, managing their medication, completing household chores or helping them handle their daily activities. But it can often mean managing their finances as well.
Studies show that the ability to perform simple math problems, as well as to handle financial matters, can be among the first skills to become more difficult as people age. No one wants to think of a time when their parent or a loved one may need them to step in and make decisions for their care when they are unable. But it’s important to learn about crucial financial and legal considerations before you truly need to know what your loved one’s wishes may be.
A power of attorney is a legal document that allows a principal to appoint an agent to act for them should they become incapacitated. The agent is expected to place the principal’s interests ahead of his or her own, which is why it is important for you and your loved one to pick a trusted individual. There are multiple types of decisions that the agent can be given the power to make, including the power to:
- Make financial decisions
- Make gifts of money
- Make healthcare decisions, including the ability to consent to giving, withholding, or stopping medical treatments, services, or diagnostic procedures. (Note: your loved one can also make a separate “health care power of attorney” to give only this power to another individual.)
- Recommend a guardian
AgeLab outlines very well the four types of power of attorney, each with its unique purpose:
General Power of Attorney. In this situation, the agent can perform almost any act as the principal, such as opening financial accounts and managing personal finances. A general power of attorney arrangement is terminated when the principal becomes incapacitated, revokes the power of attorney or passes away.
Durable Power of Attorney. This arrangement designates another person to act on the principal’s behalf and includes a durable clause that maintains the power of attorney after the principal becomes incapacitated.
Special or Limited Power of Attorney. In this instance, the agent has specific powers limited to a certain area. An example is a power of attorney that grants the agent authority to sell a home or other piece of real estate.
Springing Durable Power of Attorney. In some states, a “springing” power of attorney is available and becomes effective when a specified event occurs such as when the principal becomes incapacitated.
It’s helpful to have these conversations in happy times, when your loved one is well so you can determine their wishes for their financial security and healthcare should a time come when they are unable to make the choices for themselves.
You and your loved one can get help with power of attorney questions by consulting an elder law attorney. The National Academy of Elder Law Attorneys can help you find a local professional for your area.