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There are several essential legal documents every older person should have.
They include a will (or living trust), which lays out how you want your estate to be distributed after you die; beneficiary designations, which divide up the proceeds of brokerage and mutual fund accounts; an advanced healthcare directive, which instructs medical professionals what you want them to do if you’re critically ill and can’t tell them yourself, and a healthcare proxy, a person or persons designated to carry out those medical decisions.
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But there’s a missing piece: If you’re incapacitated through, say, a stroke or automobile accident, you’ll need to designate someone to manage your finances, pay rent, mortgages and utility bills, and hire home health aides, real-estate brokers or anyone else whose services you may need.
Power of attorney does for your finances what a healthcare proxy does for your medical care and makes sure good decisions get made under difficult circumstances.
“Especially as we get older, we need people to stand in for us from time to time or permanently if we become mentally or physically incapacitated,” said Joanne Seminara, a New York-based attorney who specializes in elder law.
“Power of attorney is a document that’s given by a person to authorize another person to act for him or her in the event [he or she] is unable to act with respect to all kinds of financial affairs—[bills,] real estate, virtually anything you can think of that has to do with property or rights.”
A power of attorney is straightforward, she said, but every state has its own version, so you’ll have to have it drafted by an attorney practicing in the state in which your instructions need to be carried out. It’s called “durable power of attorney” because it’s “durable” until your death, when it’s extinguished because there’s no living person whose wishes need to be represented anymore, and other documents like wills and living trusts kick in.
Just as important as filing the document is selecting the person who will have the power.
“You want to choose somebody, obviously, who’s going to be responsible enough to take care of your affairs… someone who’s going to make sure there’s oil in the heating system so your pipes don’t freeze, who’s going to make sure the things that need to get done to protect your assets are done, file your tax return, maybe go see a lawyer and talk about long-term care,” said Seminara, who is also co-author of 5@55: The 5 Essential Legal Documents You Need by Age 55.
“It’s going to be someone with an innate sense of responsibility for you, and an interest in helping you, because if they don’t act and they don’t take on the role, even though you’ve put their name on a piece of paper, it’s useless.”
Who could that be? “Most people appoint their spouses if they’re competent and well and they trust them, and typically they do,” she said. Others appoint a sibling or a child of legal age, especially one who is responsible and knowledgeable about finances.
But with so many families dispersed across the U.S. (or even around the globe) and with 28% of older adults living alone, finding such a person may not be easy. “They don’t have anybody, are not close to anyone, and that’s a very big problem,” Seminara said.
A friend, a neighbor, a favorite niece or nephew, even a respected leader in a church or synagogue might be able to step in. So might a trusted attorney or financial adviser. And you might want to name a primary agent and one or two alternates as backups in case the primary agent can’t do the job.
Trust is paramount. “It’s extremely important that you choose someone you absolutely trust, because if you choose the wrong person, you’re giving them a license to write checks for themselves if they’re dishonest,” she said.
But not designating anyone to have power of attorney can create other problems, if you should become incapacitated. In that case, your loved ones may have to go to court to ask a judge to appoint a guardian over your person or property and then live with whatever that person decides.
That’s why getting it done yourself is crucial.
“Sadly, people don’t realize the importance of this relatively simple document until it’s too late,” Seminara said. “It’s so important to do this document while you’re fully competent and know what you want and know who you want to appoint and not to wait until the last moment.”
