Medical vs Financial Power of Attorney: What You Need to Know
April 3, 2021
There may come a time when you’re no longer capable of making decisions regarding your own finances and personal health. In that event, you’ll need to have an agent appointed under medical and financial powers of attorney to make those crucial decisions on your behalf. These decisions might include whether to admit you to long-term care, specific treatments you want or don’t want to receive, and who can access your medical records.
Generally speaking, a power of attorney (POA) is a document that allows another person to make decisions on your behalf. You, the person giving the power of attorney, are known as the principal, while the person to whom you grant the authority is known as the agent or attorney-in-fact.
A medical power of attorney and a financial power of attorney are generally separate legal documents, each with its own responsibilities and governed by applicable state laws. Despite that, you can name the same agent in both documents.
Financial Power of Attorney
A financial power of attorney is a document that gives someone else the ability to oversee your finances. This can include everyday tasks like paying bills or more complicated financial concerns like selling or buying real estate.
A financial power of attorney can take effect immediately upon signing, or its powers can be “springing,” which means they take effect upon the occurrence of some future event (such as the incapacity of the principal). If you suffer a serious illness such that you’re no longer capable of making rational decisions, one or more doctors (as spelled out in the POA) will certify your incapacity, and the POA will take effect.
Another reason you might create a financial POA is if you can’t be present to close a transaction. If you’re trying to buy property thousands of miles away, you might choose to draw up a limited POA that enables an agent to negotiate the purchase on your behalf, rather than dealing with the annoyances of long-distance communication.
Medical Power of Attorney
A medical power of attorney, also called a healthcare proxy, is a document designating an agent to make medical treatment decisions for you. This might include blood transfusions, surgery, experimental drugs and procedures, long-term care, and other significant decisions.
Also consider whether you feel it’s appropriate to execute other declarations with respect to future medical treatment, such as a living will, CPR directive, or Medical Orders for Scope of Treatment (MOST) form. Note that a CPR directive and MOST form must be completed with your medical provider and should be coordinated with your medical power of attorney to avoid misunderstandings.
Why You Need Powers of Attorney
Think of a power of attorney as a safety net protecting against the potential issues that may arise during an incapacitating event. While most people know the importance of writing a will and making arrangements for what happens to their business and personal wealth, many don’t consider the possibility that they might eventually lose the ability to make reasonable decisions.
It’s an uncomfortable topic, but it’s important that you’re prepared for any eventuality. If you never need your power of attorney, all the better. If something does happen, you’ll be able to rest easy knowing that your affairs are in order.
Should You Appoint Two Different People?
You can assign one person to act as the agent for both your medical and financial power of attorney if you’d like — it’s commonplace for individuals to name their spouses or other adult family members on both documents.
It’s worth considering, though, that medical and financial powers of attorney are created for two different reasons. As such, you may consider appointing two separate people, each with their own qualifications, to handle the two separate tasks.
Keep in mind that the two people you appoint might need to work together. If you suffer a medical emergency and are in a coma, medical and financial decisions will need to be made simultaneously. Discuss your wishes with each person individually and together to ensure that they’ll make the decisions you want them to make.
Talk to First Western Trust
If you’re considering drawing up a financial or medical power of attorney, it’s important that you meet with an estate planning attorney to put the necessary documents in place. We can work with your attorney to ensure that you have a plan in the event that something goes wrong. Powers of attorney are an important part of any estate plan. First Western can help.
This information is not legal, investment, accounting, or tax advice and is for informational purposes only. Readers should not rely on this information as a substitute for their own research or for obtaining legal, accounting, or tax advice from their own counsel. Information is current as of April 3, 2021 and is subject to change without notice.