financial power of attorney and healthcare directives

In short

A friend of mine once spent three weeks in court trying to pay his own father's electric bill. His father was alive, but he could no longer sign his name, and no paper said who could sign for him. If you are holding off on these two documents, you are in good company, because nobody enjoys the thought. Still, a financial power of attorney lets a person you trust handle your money if you cannot. A healthcare directive tells your doctors what care you want and names who speaks for you. Both are written while you are well and can think clearly. State law shapes both, so the forms differ from place to place. Sign them, tell your people where they live, and revisit them when life changes.

The whole of it

What it is

I once sat with a neighbor on her porch the week after her husband had a stroke. She was a sharp woman, and she cried because she could not get into his bank account. She did not cry over the money. She cried because the bank treated her like a stranger.

That is the problem these papers solve. A financial power of attorney is a signed document. In it, one person, called the principal, gives another person, called the agent, the right to act on the principal's money matters. The agent might pay bills, file taxes, or manage an account. It does not hand over ownership of anything. It hands over the ability to act.

A healthcare directive is a different kind of paper, and it often comes as two parts. One part is a living will, which states the kind of treatment a person wants or does not want near the end of life. The other part names a healthcare agent, sometimes called a healthcare proxy. That person speaks for the patient when the patient cannot speak. Some states bundle both parts into one form.

Both papers protect your wishes. They also spare the people who love you from guessing during the hardest days of their lives. That is a real kindness, and you are the only one who can give it.

How it works

You have probably heard the phrase durable power of attorney. The word durable matters. A durable power of attorney stays in effect even if the principal becomes unable to make decisions. A plain one, in many states, ends at that very moment. That would defeat the whole point.

There are two common ways the agent's power can begin. An immediate power of attorney works the day it is signed. A springing power of attorney begins only when a stated event happens, such as a doctor certifying that the principal is incapacitated. Springing sounds safer to many people. It can also cause delays, because a bank may want proof before it will honor the paper.

The agent owes a legal duty to the principal. In general, the agent must act in the principal's best interest, keep the principal's money apart from the agent's own, and keep records. The exact rules come from state law. Many states have adopted a model law called the Uniform Power of Attorney Act, but each state decides for itself, so check your own.

Healthcare papers work a little differently. A healthcare agent steps in only when a doctor finds the patient cannot make or share decisions. The agent then follows the patient's written wishes and what the agent knows of the patient's values. The directive is shown to the hospital, and a copy goes in the medical record.

Signing rules vary. Many states require a notary, or two witnesses, or both. Some states bar certain people from serving as a witness, such as the named agent. The plan is simple: use your state's own form, and follow its signing steps to the letter.

The numbers, and where to find yours

Most of what matters here is not a number at all. It is a name, a signature, and a safe place to keep the paper. Still, a few figures are worth knowing.

Cost first. Many state bar associations, state attorney general offices, and state health departments publish free forms. A lawyer may charge a fee to draft the papers, and the fee depends on the lawyer and the place. Notary fees are set by state law, so ask your state's notary office or a local notary what applies to you.

Age next. Most states let an adult sign these papers, and an adult is generally someone who has reached the age of majority in that state. The age of majority is set by state law, so look it up for your own state.

Last, the paperwork around taxes. An agent who files a return for the principal may need to send the IRS a form that shows the agent has authority. The IRS publishes that form on irs.gov, and its instructions explain when it is needed. The same goes for Social Security. A general power of attorney does not let someone manage another person's Social Security benefits. The Social Security Administration uses its own process, so read what ssa.gov says about representative payees.

A worked example

Let me tell you about a woman named Marta Reyes. She is 58, a widow, and she runs a small bakery. She has a daughter, Elena, who lives nearby, and a son, Paul, who lives three states away.

Marta sat down one slow Tuesday and made her choices. She picked Elena as her agent for money, since Elena lives close and keeps tidy books. She named Paul as the backup, in case Elena could not serve. For her healthcare agent, she picked Paul first, because he is calm in a crisis, and Elena second.

Now watch what the papers do. Say Marta has a car accident and cannot sign for three months. Her bakery rent is $2,400 a month. Her supplier bills run $1,150 a month. Her loan payment is $640 a month. Add them up. $2,400 plus $1,150 plus $640 is $4,190 a month. Over three months, that is $4,190 times 3, or $12,570.

With a signed durable power of attorney, Elena walks into the bank, shows the paper, and pays those bills from Marta's account. The bakery stays open. Without it, Elena might need a court to name her a guardian, and that can take weeks and cost real money. The bills pile up all the while.

Marta also wrote down her wishes in her healthcare directive and gave Paul and Elena each a copy. When the hospital asked who spoke for her, the answer was already on paper. Nobody argued. Nobody had to guess.

That peace cost Marta one afternoon.

Where it goes wrong

I do not say this to scare anyone. I say it because I would hate to see good people caught short.

The first trouble is a form that does not fit the state. A paper signed in one state is often honored in another, but not always, and a bank may balk. If you move, look the papers over again.

The second trouble is picking an agent for the wrong reason. Naming the oldest child out of habit is common. The better question is who is honest, steady, and willing. An agent with access to your money has real power. Choose with care, and consider naming a backup.

The third is signing the paper and then hiding it. A directive in a locked drawer helps no one. Tell your agent where the papers are, and give your doctor a copy of the healthcare one.

The fourth is waiting too long. A person must generally have the mental capacity to sign. If capacity is lost first, these papers cannot be made. Then the family may need a court to appoint a guardian, which is slower and costlier.

The fifth is forgetting to update. A divorce, a death, or a falling out can leave the wrong name on the paper. Some banks also hesitate to accept an old power of attorney, so a fresh one can save trouble.

Questions to answer before you leave this page

Who in your life is honest, steady, and willing to take on a job that may be hard, and have you asked them whether they would say yes? Do you have a backup in mind in case your first choice cannot serve? Have you looked up your own state's forms and signing rules, whether that means a notary, witnesses, or both? Do you want your money agent to start right away or only after a doctor certifies you cannot act, and do you understand the tradeoff? Have you thought about what kind of care you would want if you could not speak, and have you talked it over with the person who will speak for you? Do your doctor and your agents each have a copy, and do they know where the originals are kept? When did you last read these papers, and has anything changed since, like a marriage, a move, or a loss?