When asked if they’ve made estate plans, many people immediately think of a last will and testament or perhaps a trust. However, what they commonly overlook is the importance of having a power of attorney. Although it’s difficult to think about being incapacitated, it’s in your best interest to be prepared for worst case scenarios. You can appoint your partner, friend, adult child, or even an impartial power of attorney. Regardless of who you choose, below is a brief overview of key considerations when making your decision.
What is it?
We’ve briefly discussed powers of attorney in a previous post about handling wills and estates during the coronavirus pandemic which you can find here. Essentially, there are 2 main kinds of powers of attorney that you should consider. However, note that you can choose the same individual(s) if you so please.
Power of Attorney for Property
The appointed individual is responsible for managing and making decisions about your property and financial affairs in the event that you are incapable of doing so yourself.
Power of Attorney for Personal Care
The appointed individual is responsible for making decisions about your healthcare, housing, nutrition, and other aspects of your personal life in the event that you are incapable of doing so yourself.
Do You Need a Will Executor and a Power of Attorney?
In short, the answer is yes. You’re advised to have both because they serve different purposes and are applicable at different times. A power of attorney is a legal document that authorizes the appointed individual with managing your affairs when you aren’t able to do so yourself. On the other hand, a will executor is responsible for administering your wishes and distributing your estate as per the instructions in your will. Therefore, the most significant difference between both is that a power of attorney protects your wishes while you are still alive whereas an executor does so after you have passed away.
Can You Have Multiple Power(s) of Attorney?
Yes, you can have more than one power of attorney. However, ensure that you specify whether they will be “joint attorneys” or “joint and several attorneys.” Further down the page you’ll find the distinction between both as well as a brief exploration of the pros and cons of each.
Should You Have Multiple Powers of Attorney?
It depends. Depending on the nature of your assets, you may be more inclined to appoint different people to handle your personal matters and your industry-specific affairs. For example, perhaps you would like to appoint your adult child as your power of attorney for personal care. But what happens if your child has no experience or knowledge with business-related matters. In this case, you might want to consider choosing someone more well-suited to manage your business. The following are key considerations when deciding who to choose to deal with your business and/or special assets on your behalf:
- Does your business have complicated shareholdings? Will it require someone who can work with your professional advisors?
- Is your business part of a unique industry? Will it benefit from having someone who understands and has experience with the industry?
- Does your business have specialized intellectual property? Is your business’ success dependent on someone capable of managing IP, trademarks, copyright, patents, renewals, etc.?
Joint vs. Joint and Several Attorneys
As mentioned above, if you choose to appoint more than one power of attorney, it is absolutely critical that you specify whether they will act as joint or joint and several attorneys.
As the name suggests, joint attorneys must act together regardless of the matter at hand. This means that they must agree on and be present at the same time for any action to take place. Therefore, if one individual is absent then you’re left at a standstill. In addition, if the appointed individuals don’t get along with one another then they are more likely to cause significant conflict. As a result, they may require litigation to resolve their issues.
Although every decision must be unanimous, choosing to have joint attorneys may be beneficial. The chances of misusing financial funds is less likely to occur. For example, funds cannot be withdrawn unless both individuals go to the bank and both provide their signatures.
Joint and Several
If the appointed individuals are permitted to act jointly and severally, they can make decisions without consulting one another. The biggest drawback, however, is the potential for financial abuse. Furthermore, the risk of needing litigation is still present. If one is unhappy with the actions made by another, they may resort to more drastic measures to stop these actions.
Conversely, dividing up the responsibilities will reduce the burden of work for each individual.