Power of Attorney: What Is It and Why Do You Need It?

 Your loved one has just been diagnosed with dementia, and because the condition is so advanced the doctor has no choice but to declare them “incompetent”—meaning they are no longer able to manage their own affairs due to their medical condition. At this point, someone else is going to have to step in to do business and make decisions on their behalf. But just who, exactly, is that going to be?

Far from being a fictionalized “worst case scenario,” this was the exact situation I faced with my grandparents as both of them were diagnosed with dementia at the same time. Their attorney handed me a set of legal documents and basically said, “You’re up.”

At the time, I didn’t have the faintest idea what those papers were, nor did I comprehend the scope of their authority—but I sure did learn fast that power of attorney (POA) refers to the granting of authority to one individual to make decisions for, and to act on behalf of, another individual.

I’ve discovered people are often confused about the POA, thinking they can just go get one when—or if—something happens to their loved one, but that’s not always the case. If there is no POA in place before something happens to your loved one, then you may be in for a horrifying wake-up call when you realize that doctors, banks and other professionals will not necessarily do business with you just because you say you’re the next of kin.

An Advance Directive

The POA is considered one of the advance directives, and it works like this: the person drafting the POA document, known as the principal, will choose a person to serve as their agent. By putting it in writing in the form of a POA, the principal is legally removing any doubt as to who they want making decisions for them in the event they are unable to do so. It’s direction (the naming of their chosen agent) being provided by the principal before it’s needed.

Technically, It’s Two Documents

The first is the medical power of attorney which allows the agent to make medical decisions for the principal, but nothing more. For everything else there is the second document, the durable power of attorney. It is vitally important that the word “durable” be included on this document; in the event that the principal develops some type of dementia or other form of cognitive impairment, the durable POA will stand, able to continue working because it is not affected by incapacitation of the principal. A non-durable POA will cease to function if the principal becomes incapacitated.

What Happens if There is No POA in Place?

Knowing how the POA functions is one thing; but equally important is understanding what happens if there is no POA in place. If an individual becomes incapacitated before they designate an agent of their own choosing, management of their money will fall to the state in which they live, and the incapacitated person will essentially become a ward of that state—that is, the courts will decide who can make decisions for them and, ultimately, what their care will look like. A relative can petition the court to be named as a guardian to oversee the ward’s estate, but it’s a time-consuming and costly process, and the guardian is ultimately accountable to the state regarding their management of the ward’s affairs—which may or may not be in line with the ward’s wishes.

Is the Agent Financially Responsible for the Principal’s Debts?

Another key piece of information about the POA is related to questions of personal financial responsibility. Does having POA for a loved one make the agent responsible for the principal’s debts? The answer to this question is no; the person with POA is not financially responsible for their loved one’s bills unless:

• The agent co-signed a loan with the principal
• The agent is on a joint checking account with the principal
• The principal is the spouse of the agent and lives in a community property state (Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington and Wisconsin)

I encourage you to be knowledgeable about the documents which will most effectively help you and your loved ones. I am not an attorney and I am not giving you legal advice, but I have served as the appointed agent, and I understand how crucial it is to have the right documents so you can provide the care your loved one needs. I urge you to see an attorney and get the proper documents in place—for your loved ones and for yourself.