A power of attorney is a legal document that you can use to give another person the ability to act on your behalf. It can be necessary to grant a power of attorney under some circumstances, but there is an inherent disadvantage that is readily self-evident.
It can be disconcerting to allow someone else to act for you, but you are clearly going to name a representative that you trust implicitly. Plus, to protect yourself, you could grant a limited power of attorney. With a limited power of attorney, you include stipulations, and the agent must act within the limitations that you set forth.
We focus on elder law and estate planning matters. In our area of the law, durable powers of attorney are often utilized to account for latter life incapacity.
Many elders become unable to make sound decisions on their own, and you can prevent a guardianship proceeding if you execute durable powers of attorney. The durability allows the power of attorney to remain in effect even if you become incapacitated.
The same basic disadvantage exists with regard to the handing over of power to another individual. However, in addition to this, there are some estate planning factors to take into consideration.
You could create a durable financial power of attorney empowering someone to handle your financial affairs in the event of your incapacitation. However, the power would terminate at the time of your death. As a result, the durable power of attorney would have no value from an estate planning perspective.
Plus, you would be giving the agent the power to act on your behalf even if you never become incapacitated.
On the other hand, you could choose to convey assets into a revocable living trust. As the grantor of the trust you can act as the trustee while you are alive and well. You would name a successor trustee to administer the trust after your passing.
It would also be possible to empower the successor trustee to manage the trust in the event of your incapacitation. This would provide dual benefits, so you may want to consider the creation of a revocable living trust if you are concerned about overall efficiency.
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You should certainly take steps to prepare for possible incapacity when you are creating your estate plan, because many elders become unable to make sound decisions on their own at some point in time.
There are various causes of incapacity, but Alzheimer’s disease alone is a huge threat, striking up to 45 percent of the oldest old.
If you would like to put a plan in place, our firm can help. We offer free consultations, and you can send us a message through our contact page to set up an appointment: Indianapolis IN Incapacity Planning Attorneys.
Mr. Kraft assists clients primarily in the areas of estate planning and administration, Medicaid planning, federal and state taxation, real estate and corporate law, bringing the added perspective of an accounting background to his work.