Why A Power of Attorney Is Important
One of the most important decisions individuals can make during their estate planning is whether or not to include a power of attorney (POA) to help with financial or health concerns.
All estate planning documents are important, but a POA is arguably the most important of these.
A POA is a document that grants one person, called the agent or attorney-in-fact, the legal authority to act on behalf of another, called the principal. The agent can be a trusted relative or friend, or a financial or legal professional who is responsible, trustworthy and knowledgeable in legal or financial matters.
A POA is a type of advanced directive, like a living will, and usually accompanies the principal’s other estate-planning documents. There are several types of POA’s:
- Durable medical power of attorney
- Durable financial power of attorney
- Limited power of attorney
A durable medical or financial POA authorizes the appointed agent to make medical or financial decisions on behalf of the principal during periods of disability or incapacity.
A limited POA has restricted powers and is often used for specific purposes, such as proxy signings for real estate or investment transactions.
Benefits of POA
A financial POA oversees the financial concerns of the principal’s estate, including the estate’s income, assets and liabilities. This can also include investments, the payment of bills or taxes, document-signing, or even property sales.
However, it is important to note that a financial POA does not control assets that are in a trust, but does have authority to manage retirement accounts, annuities, life insurance and bank accounts not tied to a trust.
A POA for healthcare appoints a health care agent to make decisions on behalf of the principal. Should the principal’s physician determine that they are mentally or physically incapacitated, the health care agent will have access to the principal’s medical records and can make decisions about caregivers or facilities, treatment options, as well as the granting or withholding of surgeries, tests, or medications.
POA Requirements in Illinois
Under Illinois law, for a POA to be legal, it must fulfill certain requirements:
- It must name an agent with a description of the actions the POA authorizes the agent to take on their behalf
- The principal must sign and acknowledge the POA document in front of a witness 18 years or older
Without a POA, individuals would lose the control they have over important medical decisions or the management of essential financial concerns of the estate should they become incapacitated.
Under state law, the court would choose a statutory surrogate who could be a family member but who may not make the best decisions on your behalf, and who may not agree or even know your religious or personal preferences. Such a situation could give rise to challenges from other family or friends.
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