Powers of Attorney

12.06.2021

Author: Attorney Catherine C. Orton

Written, properly executed Powers of Attorney are key components of a good estate plan. A review of these key documents helps to underscore their importance.

There are two types of Powers of Attorney.

1. Financial Power of Attorney: A financial Power of Attorney is a written document in which you authorize someone else to “step into your shoes” to act on your behalf to handle your financial affairs. Of course, a financial Power of Attorney can be drafted so the powers are limited or broad. In a comprehensive Estate Plan, a financial Power of Attorney usually provides broad powers so the person you have named to act for you (your “Agent”) is authorized to handle whatever financial issues may arise in the future. Financial Powers of Attorney can be drafted so you remain in full control until you are disabled or incompetent, and then, your designated Agent will continue to hold and exercise the powers even after your disability, thus, making it a “durable” Power of Attorney. In a financial Power of Attorney, your Agent can pay your bills, cash your checks, deal with your retirement benefits, handle your real estate, and do all other things which you could do for yourself if you were able, all without Court involvement.
2. Health Care Power of Attorney: The Health Care Power of Attorney is a written document which authorizes your chosen “Agent” to make health care decisions for you if you are medically certified to be unable to make those decisions for yourself. Again, this Power of Attorney can be broadly drafted to include virtually all medical decisions including medication, diagnostic tests, hospitalization, surgery, and even placement in a nursing home. A Health Care Power of Attorney can, and should, spell out end-of-life provisions which will guide your Agent in making the decisions in accordance with your personal views and beliefs. For example, your Health Care Power of Attorney can identify important preferences you may have about how much medical care you should receive if you are terminal and/or permanently unconscious, and it can even include your wishes to have a particular member of the clergy provide spiritual guidance when death is imminent.

Why do you need these Powers of Attorney? Wisconsin Law provides that if a properly executed Durable Power of Attorney and Health Care Power of Attorney are in place, you can avoid the considerable cost and embarrassment of a Guardianship. Guardianships involve a court proceeding requiring a costly medical report, a social services report, and a formal hearing with testimony to determine your incompetence and the appropriate place for you to live.  Following the hearing, if incompetence is proven, the judge appoints someone to step in to make your medical decisions, pay your bills, manage your assets and order the most appropriate “placement” for your medical needs (known as a “Protective Placement”).  The “Guardian’s” decisions are reviewed by the Court every year to verify the accounting of all income and expenses, and to review your “placement.” The costs of a Guardianship and Protective Placement far exceed the cost of these Powers of Attorney.

As you can see, the financial and medical Powers of Attorney are extremely important documents which allow your chosen Agents to make decisions without the costs of ongoing Court involvement.

One frequently asked question is how long these Powers of Attorney continue in effect. Obviously, the Health Care Power of Attorney power dies with you. Interestingly, the law dictates that a financial Power of Attorney also ends automatically when you die. In other words, your Agent cannot pay bills through a financial Power of Attorney after you die.  At that point, your other estate planning arrangements, through your Will, Trust or beneficiary designations take effect.