Powers of Attorney and the Importance of Estate Planning

Here’s a great article writing by a friend of mine, Michael Goldberg, Attorney with Johnston Tomei Lenczycki & Goldberg LLC on the importance of POA’s. Please read and feel free to comment or reach out to Michael.

- Right at Home Owner Mike Steiner

Make it Easy on Your Family - Create Powers of Attorney

As a probate and guardianship lawyer, I see my fair share of the fallout from failure to plan one’s estate. When people think of estate planning, they think of last wills and testaments, and perhaps trusts. Incredibly, the most overlooked documents prove to be the most fundamental cornerstones of estate planning, the humble powers of attorney.

Powers of Attorney for Healthcare

Powers of attorney come in two varieties in Illinois. First, you have a power of attorney for healthcare. This document appoints a person to act on your behalf, an agent, that will make healthcare decisions for you. The ability of your agent to make decisions can be immediate upon execution of the power of attorney, or it can be what is known as “springing,” meaning that it only activates upon a certain event occurring. Usually the event that triggers a springing power of attorney is when your doctor determines that you are unable to make your own healthcare decisions, for whatever reason – be it traumatic brain injury, dementia, or severe addition, to name a few. Once that determination has been made, your agent will certify in writing that they agree with your doctor and agree to begin acting as agent. They are then empowered to make healthcare decisions on your behalf under the power of attorney.

Powers of Attorney for Property

The financial corollary to the power of attorney for healthcare is the power of attorney for property. This document grants your agent the right to make financial decisions for you. Similar to the power of attorney for healthcare, this document can be immediate or springing. It is fairly common to see the same trigger for a springing power of attorney for property – your physician determines that you are unable to make your own financial decisions. Once that determination has been made and your agent signs off on it, your agent is empowered to make financial decisions on your behalf. Those decisions can include accessing your financial accounts, transferring assets, liquidating stock, selling your real estate, running your business, entering into contracts on your behalf, and paying your bills.

What Happens if you Have No Powers of Attorney?

It is an unfortunate circumstance where a person has no powers of attorney in place and ends up in a situation where he or she can no longer make healthcare or financial decisions. When a person does not have a power of attorney for healthcare in place and loses capacity, a spouse may have limited rights to make healthcare decisions ad hoc under the Health Surrogate Act in Illinois, but for long-term decisions, or for decisions by family and friends that are not the incapacitated person’s spouse, there is no right to make healthcare decisions absent guardianship appointment by a Court, as outlined below. Furthermore, if a person does not have a power of attorney for property in place, there is no equivalent Surrogate Act, so in order to make financial decisions and access accounts, and to take other common actions, guardianship proceedings must be instituted.

What is Guardianship?

Guardianship in Illinois is a Court process whereby individuals can be appointed guardian over a person who does not have capacity and has no valid powers of attorney in place. The process can be intensive, expensive, and viewed by many as governmental intrusion in the sanctity of close family relationships. In a guardianship proceeding, a person will ask the Judge to appoint him or her guardian over the disabled individual. The Judge may approve or disapprove the request. If the Judge approves the request, the process is not over. In fact, the guardian now has to relay to the Judge the disabled person’s (referred to as the “ward”) health state, and to provide the Court an initial inventory. Furthermore, the guardian must annually report to the Court on the ward’s state of health and wellbeing, and account for the ward’s assets. As you can imagine, a lot of information must be provided to the Court every year. Imagine having to describe to the Court every year how you are spending your spouse’s money for his or her benefit! Or consider that if you want to make a big purchase, or sell real estate, or move the ward to a different residence, you must first obtain Court permission! This does not sit right with many spouses. 

Plan in Advance

When we represent the guardian of a ward in a guardianship proceeding, we are often asked how we can avoid such onerous requirements. The answer is simple – if your spouse is incapacitated, guardianship is the only option. But if you are in the fortunate position that neither you nor your spouse are incapacitated, then there is a better option. Create your powers of attorney now, so that if the situation should arise, you can completely avoid the pain of guardianship and its intrusion into your personal life. Powers of attorney can be very straightforward documents and are drafted by many attorneys. Our firm creates powers of attorney for every estate planning client that comes through our doors as a matter of course. Powers of attorney are fundamental to any good plan, and can mean the difference between simply being vested with the power to make decisions for your spouse without any further permission, or having to go to court and ask for permission from a Judge. Do your family a favor, and create powers of attorney.