A component of estate planning we frequently see overlooked by clients is the power of attorney. It may come as a surprise to some, but the practical reality is that having appropriate attorneys-in-fact appointed via a power of attorney (POA) can be just as or even more important than wills and trusts, depending on your financial and family situation. Such documents only become more important as we age and increase in likelihood of lapses in capacity and medical emergency. 

What is a Power of Attorney

Broadly speaking, a power of attorney is a document which, if prepared properly, empowers someone else to make certain decisions on your behalf, particularly when you are unable to do so for some reason. 

In the estate planning context, we typically refer to the durable power of attorney – that, powers that persist (or perhaps initiate) in the event of incapacity, and focus particularly on empower the named person (the attorney-in-fact), to make financial and/or medical decisions on your behalf. 

Relative to other estate planning, preparing POA documents for both medical and financial matters is typically relatively inexpensive, particularly when compared to the value they impart. 

Clarity of Decision-making Power

In the event of sudden or unexpected incapacity (and often in other cases too), loved ones, medical facilities, and financial institutions can be uncertain as to who should be/is allowed to make decisions for you; while one’s spouse or children are the natural choices, matters can be complicated if third parties are uncomfortable acknowledging their authority, or if, for example, children disagree on what course of action to take. 

There is also the question of what happens when a spouse is unavailable, or perhaps similarly incapacitated for any reason – who is the “next of kin” a hospital should look to? Financial institutions are also unlikely to recognize the authority of anyone not specifically empowered to direct financial decisions, whether spouse, child, or otherwise.

A POA enables you to avoid these issues and ambiguities, and naming specific people to make decisions on your behalf can avoid people you would not want to be making decisions for you from ending up with the ability to do so. 

Control Over Decision-making 

It is generally prudent to broadly empower an attorney-in-fact being named in a durable power of attorney; it can be dangerous to need such a person to make a important decision for your benefit, only to find they are unable to do so because they were not given such a power in the document. 

At the same time, if there are decisions, whether medical or financial, that you would not want an attorney-in-fact to make, it is possible to draft the POA to reflect such restrictions. For example, certain kinds of medical care that you do or do not want for any reason, or the right to sell or otherwise dispose of certain assets, like particular parcels of real estate, if it is your desire to ensure they remain in your name for any reason. 

Least Restrictive Means of Handling Incapacitated Persons

In Missouri, whenever someone becomes unable to manage their affairs or make decisions on their own behalf due to persistent unconsciousness or mental illness or impairment, it may become necessary for someone else to be empowered to make those decisions on their behalf. Probate Courts can appoint those that apply for such powers as guardians and/or conservators of such incapacitated persons, or if necessary, appoint a government official, the public administrator, to do so if no one else is willing and able. 

A modern trend in probate courts is to favor the use an POA executed (before incapacity) by an incapacitated person to empower the attorney-in-fact to manage their affairs in the same manner a court-appointed guardian and/or conservator might. If properly prepared, this may avoid the need for yourself and your family to go to court to name a guardian/conservator in the event you are incapacitated. It also allows you to have greater influence on who is making medical and financial decisions for you; while you can name your attorney-in-fact in a POA, the pool of people who might successfully petition for appointment as guardian/conservator may include those you would prefer not to be making such decisions. 

Courts see POAs as the “least restrictive” means of managing incapacitated persons – it requires the least intrusion into an incapacitated person’s affairs by the government and others, is typically the most economically efficient by avoiding the need to go to court and file annual reports, and allows you more advance control over who will have the responsibility of acting for you. 

Limitations of a Power of Attorney

A POA is not a substitute for other kinds of estate planning. Powers granted under a POA terminate upon death – that is, your attorney-in-fact is not empowered to effectuate transfers of assets after death, as a will or trust might. Further, the powers that can be given to an attorney-in0fact under a POA are limited by state law; even if the document states it provides certain powers, if the law does not permit delegation of those rights, that text will be ineffective. While important, these documents do not solve all problems estate planning and elder law may need to resolve.  A poorly drafted POA can be as bad or worse than no POA, potentially failing to accomplish the goals you intended it to and not realizing until it is too late to fix, or accidentally over empowering someone to make decisions you would not have wanted.  Durable POAs are best prepared as part of a wider estate plan, and after consultation with a qualified professional.