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Estate Planning

3 Traps to Avoid Wrapped in “No Charge”

By September 26, 2012No Comments
A seminar of sharks

Photo: Ilona Kuusela, Finland

There I was, sitting in a seminar, as my colleague began lecturing on powers of attorney. I was actually interested in hearing the next presentation on a more complex matter but, of course, you never know what nuggets can be gleaned from a refresher on the basics. Plus, Illinois laws change all the time. So I sat and appeared interested while deciding what to cook for dinner when suddenly another panelist blurted out quite fervently, “I disagree! A durable power of attorney is not better than a springing power of attorney!” My ears perked up; no one loves a good shark fight better than a little guppy like me.

Somewhere in the annals of The Shark Free Zone is an article or 2 explaining POAs. However, as a refresher, powers of attorney are authorizations to allow others to make important decisions on your behalf when you’re incapacitated. Property POAs allow agents to make financial decisions. Healthcare POAs allow agents to make healthcare decisions. Individuals think because these documents are free that they’re simple. Well…let’s return to the shark fight.

A durable POA goes into effect upon signing and lasts through incapacity until death. A springing POA has a designated beginning and ending, even though the agent signs the document. For example, the Illinois Statutory Power of Attorney forms suggest one designates a springing term to begin or end upon the determination of incapacity by a court. This suggestion shows why such basic forms aren’t so basic, even though free, and why they should be carefully reviewed before making the designations and taking the suggestions.

Trap 1: Waiting until a court determination of incapacity in order to act under a property POA may result in financial mayhem if a loved one is too ill to pay the bills.

Occasionally, individuals will say, “I don’t need a property POA because my child is also on my bank account with me.”

Trap 2: When a person is a joint owner on your bank account, that person’s creditor or creditors can place a lien or liens on the whole account.

People also sometimes ask, “I have a living will, so do I really need a healthcare POA?” If I were the smart-ass sixteen year-old I once was, then my answer would be, “Well, if the only time you want your agent to act is if there is a question about when to pull the plug, then no.” However, I am very far from being 16, thank goodness, and so I answer accordingly: A healthcare POA can include living will language and more. You can give you agent the authority to talk with doctors about your medical allergies, your medical history, and more.

Trap 3: A living will only applies to individuals with terminal illnesses or who are in a vegetative state. A lot more can happen to one between a cold and a coma, and it helps you and your loved ones if you’re prepared for that “in-between-time.”

Free doesn’t necessarily mean easy and suggestions are not rules.

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