“Trying to predict the future is like trying to drive down a country road at night with no lights while looking out the back window.”  This quote by famous author and business innovator Peter Drucker is a good analogy of just how uncertain life is.  Unfortunately, none of us is able to foresee exactly what will unfold in our lives.  Because of this uncertainty, we are subject to various risks.  Most people want to try and minimize risk as much as possible.  This is especially true if you have substantial assets or if you have loved ones who depend on you.   While it is impossible to eliminate all risk, there are some risks that you can control.  One example is the risk of incapacity.

If you are incapacitated to the point you cannot make decisions for yourself, this can put a huge burden on your family members.  In such a situation, who would manage your assets?  Who would pay your taxes or your bills?  Who would collect the mail at your house?  Who would apply for government benefits such as Social Security, Medicare, or Medicaid on your behalf?  Many people think in the event of incapacity their spouse or other close family members will be able to just step in and take care of all of these things.  The truth is that before anyone can be given that kind of authority and power, the state requires a guardianship or conservatorship to be established through a lengthy and expensive court process.  The state requires such a process because giving that kind of power and authority to someone is essentially like writing them a blank check.  Before giving another person free reign over your assets and other important life decisions, the state wants to make absolutely sure that the appointed person (the “Guardian” or “Conservator”) is someone that can be trusted to make decisions that are in your best interest.  While the state’s requirements are important and necessary, they can be a huge burden on loved ones.  The court process can take a lot of time, causing frustrating delays in managing your affairs.  It can also be very expensive because of court filing costs and attorneys’ and accountants’ fees.  Additionally, even after a guardianship is established, there are several reporting and accounting requirements that the court requires.  This whole headache can be avoided with a document called a durable power of attorney.

A durable power of attorney is a letter of instruction regarding who has the authority to manage your assets and daily affairs should you become incapacitated.  Additionally, it spells out what the scope of that authority is.  If you have a valid durable power of attorney in place, there is no need for a court appointed guardianship or conservatorship.  In the durable power of attorney, you specify who is in charge of your assets and daily affairs.  This person is called your “agent.”  Your agent should be someone that you trust to make decisions that are in your best interest.  Often, this person is a spouse or close family member.  A power of attorney is one of the most important estate planning documents that you can have.  It is an essential piece of your plan to mitigate risk and take care of your loved ones in the event of incapacity.  If you are considering getting a power of attorney established, you should consult with an attorney experienced in estate planning.  An attorney will help you put in place a durable power of attorney that is valid and serves your needs.

For additional reading:

A Living Will:  An Essential Estate Planning Document

Having a Customized Durable Power of Attorney

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