You’ve probably heard the term “power of attorney” before, but you might not know the ins and outs of what it requires. In this article, we’ll go through ten things to know about a power of attorney. 

1. What is a Power of Attorney? 

A power of attorney is actually a legal document. This legal document allows you to appoint an individual (or more than one) to be in charge of your financial, healthcare, and/or legal affairs in the event that you are unable to make these decisions yourself, due to illness. The POA ensures that you will be taken care of, even if you are unable to communicate your wishes to doctors, the bank, or a lawyer. 

2. Who Needs a Power of Attorney? 

You may think that just the elderly need a POA. However, that is a misconception. Anyone can need a POA, even someone who is in the best shape of their life in their twenties. Not to sound gloomy, but illness (especially now, as COVID-19 is spreading more and more rapidly every day) can affect anyone. Don’t think that because you’re young and healthy now that you won’t need a power of attorney one day.

3. General Power of Attorney

The next four items on this list are definitional. A general power of attorney is also called an “attorney in fact” or an “agent.” This person gets a broad scope of power over your affairs. They handle financial decisions, business transactions, settling claims, employing professional help, making gifts, and even the purchase of life insurance. 

4. Special Power of Attorney

A general power of attorney is different than a special power of attorney, as the latter has less of a broad scope. A special power of attorney is a document that grants someone scope over a limited transaction or small part of your life. You might sign a special power of attorney giving someone the ability to manage your property, collect debts on your behalf, or handle business transaction. The scope is far more limited with this document. 

5. Durable Power of Attorney 

A durable power of attorney is not its own separate POA. “Durable” refers to its validity even if you become mentally incompetent. A special power of attorney or general power of attorney can be a durable power of attorney. This means that it will be valid even while you are mentally incompetent or mentally ill. It’s essentially a protective measure, granting your POA durability—lasting validity. 

6. POA for Healthcare

A POA for healthcare is a power of attorney that strictly revolves around your healthcare decisions. Say you are in the hospital for an illness and you are unconscious; your POA for healthcare will make medical decisions on your behalf, keeping in mind what you would want. The POA for healthcare will mirror your healthcare wishes. 

7. Who Should You Choose?

Only you can decide who to choose. However, the main factor is trust. Do you trust this person to make sound decisions on your behalf? Your life will quite possibly be in their hands. Level-headedness and trustworthiness are two of the most important characteristics of a POA, with a special emphasis on the latter. 

Should you suspect your POA of wrongdoing, you are not left in the lurch. There are state resources, such as an ombudsman or other legal advocates, who can look into transactions and ensure that your POA is not abusing his or her powers. If you feel you are in danger, contact law enforcement.  

8. Appointing Multiple People

You can appoint more than one power of attorney, but you need to specify whether they must make decisions together or if they are permitted to make them separately on your behalf. Note that a possible downside of this is that your POAs might not agree, slowing down decision-making and causing conflict. 

9. Can Your Choice Be Questioned? 

Your choice is valid if you are mentally competent when you sign it. Each state has its own specific laws on competency when signing such a document, and you should contact an estate planning attorney to safeguard your choice from people who may naysay.

10. Now What? 

To create a power of attorney, you should contact an estate planner. This attorney will walk you through the document and ensure it is done properly. 

With the uncertainty surrounding the coronavirus, now is the time to make sure your affairs are in order if the worst-case scenario comes to pass. Contact an estate planning attorney and set up a POA as soon as possible.

This article is tricky, as every person’s estate is different. “Prioritizing assets” is usually a term used in an emergency situation, when someone does not have an estate plan and the clock is ticking. So, currently, with COVID-19 being the huge threat that it is, estate planning has taken on an emergency function for many people.

Which asset should you protect first? This article will give suggestions as to what you should prioritize. The list runs from “most important” to “less important,” but it is all relative. At the end of the day, it is up to you to decide. Contact an estate planning attorney to determine how your particular estate plan should look.

Most Important: Living Assistance, Healthcare Decisions, POA

Living Assistance

Most people will need long-term living assistance once they get older. You may not know this, but Medicare does not pay for living assistance, such as a nursing home or assisted living. Medicaid does pay for this assistance, but many people are rightfully concerned about the quality of care they will receive if they use Medicaid. 

Setting aside a sufficient fund (even if you have to liquidate property to do so) for your living assistance is a top priority. You deserve to have a good retirement, and that includes the portion of your life where you require assisted living. 

Healthcare Decisions 

A healthcare directive allows you to delineate medical decisions before they happen. This document contains your wishes for your medical care, and doctors and nurses will abide by it. A healthcare directive is a useful document to have if you are unable to communicate these wishes (such as a Do Not Resuscitate order) yourself. 

POA

POA stands for “Power of Attorney.” A power of attorney is a document that grants someone the authority to make financial, medical, business, and/or legal decisions on your behalf. The person who you designate as POA in the legal document should be someone you trust to be level-headed and make decisions that would mirror what you would want.

Moderately Important: Business Succession, Trusts

Business Succession

This is definitely in the “most important” section for people who own a business, but for people who don’t own a business, it is not relevant, so business succession planning evens out somewhere in the middle.

If you own one of the 30.2 million small businesses in America, it is vitally important that you have a succession plan in place if you pass away. Who will get your business? Do you want your business liquidated or sold? Perhaps you want it to merge with another company, based on a pre-arranged agreement. It is never too early to plan for a business succession. 

Trusts

A trust is a legal document that sets up an immediate asset transfer. You, the donor, transfer title to an asset to a trustee. The trustee acts as a third-party representative until such a time as he or she transfers his or her legal title to a beneficiary. The beneficiary is the person you want to end up with the property after you die.

This type of document avoids probate court. It goes into effect immediately, so, in an emergency, a trust is not a bad tool to look into.

Relatively Less Important: Gifts, Last Will and Testament, Miscellaneous Transfers 

Gifts

When you’re thinking of the less-important transfers, gifts would likely qualify. Once you have everything else settled, deciding who gets what gift from your estate can become your main priority.

Last Will and Testament

Many of the courts are closed for another month until COVID-19 passes, so a last will and testament will not be probated for a long time. This document, which specifies where you want your property to go after you die, is not ideal in an emergency.

Misc. Transfers 

Small transfers (such as a favorite painting or other, non-essential item) likely can occupy the back-burner for now until more pressing matters are taken care of.

If you’re reading this article and questioning the order of the list, that is perfectly valid. Only you understand your estate situation, and everyone’s property is different. What is important to one person may be unimportant to another. Consult with a lawyer to create an estate plan that is right for you and your loved ones.

There’s no missing what’s going on out there today. Coronavirus (COVID-19) has swept across the globe and is an international pandemic. Coronavirus is, according to the CDC, more likely to be fatal to the elderly and people who have autoimmune deficiencies or preexisting illnesses. 

It’s no surprise that many people are asking how to draft an estate plan in an emergency. As you may or may not know, an estate plan is a way to legally decide where your assets will go after you pass on. People who have no estate plan, or who have an old, outdated estate plan, should take this time to make sure that they have one. And, if a global pandemic doesn’t count as an emergency, nothing does. 

First Things First: Talk to an Estate Planning Attorney 

This blog is not meant to be legal advice, and your situation is different from your neighbor’s. You will want to talk to an estate planning attorney about drafting an emergency estate plan. The important thing is not to wait, particularly if you have no estate plan or an estate plan that needs updating. 

Drafting an estate plan in an emergency is not the ideal way to do things, but that’s where we are today. Here are some suggestions as to which components of the estate plan to draft first.

Components to Draft First 

The suggested drafts include, if applicable, a healthcare directive, power of attorney, trust, last will and testament, and business succession plans. We’ll look at each one individually. 

1. Healthcare Directive

If illness causes you to become incapacitated, you still want the doctors and nurses who are taking care of you to know what your wishes are. For example, you might not want to be resuscitated (a DNR order). A healthcare directive lays out these wishes in advance, and the hospital will have them on file to refer to in the event that you cannot communicate. 

2. Power(s) of Attorney 

Finance and healthcare are two sectors of your life where you may need a power of attorney. This trusted individual, who you select, will have decision-making capacity regarding your financial and healthcare decisions in the event that you are unable to make these decisions yourself, such as in the case of severe illness or unconsciousness. An estate planning attorney can help you set up a power of attorney. Make sure you speak with your proposed individual beforehand to ensure they are on board.

3. Trust

A trust is a three-party relationship between you (the donor), a trustee, and the beneficiary. You sign over title to certain assets to the trustee for the eventual benefit of the beneficiary. The title switch goes into effect immediately. The trustee now holds title to the asset, and, when you pass on (or at another time you designate), your beneficiary will get the asset. 

A trust is beneficial in an emergency because it goes into effect right away, and it does not require the document to pass through probate court. 

4. Last Will and Testament (with a Word of Caution) 

If you don’t want a trust and have your heart set on a will, a last will and testament is an option. It describes your wishes for your property after you die, including to whom you want it transferred and how. The word of caution with this document is that a last will and testament must go through probate court. As the courts are closed now because of the pandemic, the wait time on probate court may be even longer than usual—and it was a pretty time-consuming process before all this happened.

5. Business Succession 

If you own a business, a business succession plan is a must-have. If you die, you want your business to fall into the right hands. Or, you might want it liquidated or sold. Either way, having a set plan will prevent your hard-earned business from falling into chaos.

This list is by no means exhaustive, and that is why it is so important to contact an estate planning attorney first. The attorney will listen to your particular situation, and he or she will advise you on the most important documents to draft. This session can be done over the phone or via email, but make sure to check with your attorney’s office as to the precautions they are taking during the pandemic. 

Your business is important to you. You have worked hard to achieve the success your company has, and you want to make sure that your business is protected even after you are long gone. Succession planning is part of a well-rounded estate plan. Business owners use succession planning to determine who will take over their company—if anyone—after they die. Here are the things to know about succession planning. 

Life Insurance 

It might seem odd to start a succession planning discussion with life insurance, but, if you die with life insurance, you should direct the life insurance payout to your business. That way, your company gets a cash boost during a tumultuous time. There will be enough money in the bank to satisfy the payroll, and the cash influx will prove instrumental in ensuring a smooth succession—if there is to be one.

Documentation 

Have you thought about what you want to happen to your business if you die? If so, it is important to document this in writing. Only you can make this decision, though it is wise to confer with your management team as to what they think should happen. Once you feel comfortable, document it in writing. Contact an estate planning attorney to ensure that your documentation is properly done. Otherwise, your business may be put in the middle of an acrimonious succession.

Liquidation 

Perhaps you want your business to be liquidated and sold after you die. An M&A transaction stands for “Mergers and Acquisitions.” M&A transactions are complicated. During these transactions, ownership of the business (or the cash from the liquidation) is transferred to another entity or the company is consolidated with another entity. If you decide that this is what you want to have happen after you die, that also needs to be documented.

During an M&A transaction, some of your management team will need to stay on to see the process through. Give some consideration to how you want to incentivize them to stay through the process, even though it means that they will be losing their jobs. 

Other Considerations 

You might also want to keep your business in the family. Only you can determine whether your children are the best ones to take over your business, but note that, in terms of family transfers, a business is gifted to your kids, not sold. 

This is actually a good thing because it helps avoid certain taxes if you still want income from the business. If your kid has to buy your business, they will first have to make the money and pay taxes on it. After that, you will be paid a dividend on which you will have to pay a capital gains tax. Though gifting means you won’t get anything in return for the ownership you gift your kids, this could pay off in the long run, if you are being kept financially secure by your old company.

Buy-Sell Agreements 

If you’re not gifting your business and your company has multiple owners, you will likely run into one of these buy-sell arrangements: an entity plan or a cross purchase agreement. 

In an entity plan, each owner of the business has their own private agreement with the business as an entity. This agreement states that the entity will buy the dead owner’s interest after his/her death. 

In a cross purchase agreement, there are usually two or three people who own the business. the cross purchase agreement is established between the owners. When one dies, the surviving owners each purchase a proportionate share of the dead owner’s interest. 

All of this is a little confusing, and that isn’t a bad thing. You want a succession plan to be detailed and comprehensive. Hire an estate planning attorney to ensure that your succession plan is done properly and documented correctly.

The subjects of wills and probate are very detailed. There could be pages and pages about each of them, and the majority of it would be complicated legal jargon that almost no one understands. In this article, we’ll simplify answers to the most commonly-asked questions about wills and probate. 

What is a Will?

A will (also known as a last will and testament) is a legal document. A person writes a will when they want to express their last wishes as to how they want their property to be distributed after they die. The will also will name someone to manage their estate until it is wound up (i.e. until the final distribution is made). 

The person who writes the will is called a testator. The person who manages the estate after the testator dies is called an executor. The people the testator leaves assets to in the will are known as beneficiaries.

What is Probate? 

Just because someone has written a last will and testament does not mean that the document will automatically go into effect without a court stepping in. Probate is not a legal document—it is a judicial process. During the probate process, the last will and testament is proven valid. There must be no undue influence (people manipulating the testator), all the assets must be present and accounted for, and the will must be properly executed. If the will checks out, it will be accepted by the court as a valid public document.

Is there a Minimum Asset Requirement? 

There is no minimum asset requirement for writing a will. Whether you have $1 or $1 million, you can still write a will. Many people (especially young people) think that because they do not have many assets or are a renter, they do not need a will. However, even people just starting out have at least some assets to their name and should write a will.

What Happens if I Don’t Have a Will?

If you don’t have a will, things get messy. People who die without a will are said to die intestate. In that case, the laws of your state govern how your assets are distributed. Generally, creditors are paid off first from your assets. Assets can include bank accounts, real estate, securities, stocks, houses, and possessions you own. After creditors are paid and your debts cleared, the court will organize the distribution of your assets itself.

As you can see, this is not an individualized process. A court’s goal is to clear your debts and wind up your estate quickly and efficiently. This means that your family will likely not get the assets you would want them to receive after you died. It also means your family will be tangled up in court for a long time.

Living Will vs. Last Will

A living will, also known as a healthcare directive, applies when you are still alive. It spells out your healthcare decisions in the event that you are too sick to tell a doctor what you want. For example, if you do not want to be resuscitated if your heart stops, this is something you would specify in a living will. 

Should I Write My Will Myself? 

Tempting though it may be to go on LegalZoom and write your will yourself, that is not a good idea. Though wills are overly complex, there are finicky details that are easy to miss if you do not have legal training. Missing one tiny detail can lead to a costly mistake that burdens your family after you’re gone. It is best to seek out an attorney for help.

Hopefully, this has helped you gain at least a basic knowledge of the will process and probate process. If you have more questions or want to write a will, you should contact an estate planning attorney.