The topic of estate planning can be difficult to think about, but it is an important one. An estate plan will designate how you’d like your assets distributed, provide your healthcare directives, and will protect your loved ones by minimizing conflict and ensuring their financial security. In this article, we will be discussing the power of attorney (POA) component of estate planning and why it might be important to have one.

A power of attorney gives you a say now – in how you wish to handle your affairs in the future, should you become unable to do so.¹ A POA is a legal document that ensures your wishes (typically having to do with your assets), are carried out in a manner that you as the principal – approve of. It gives a trusted person (often referred to as an agent), the legal authority to handle these wishes. The person you designate as a power of attorney doesn’t actually have to be an attorney. Anyone you trust – such as a family member or friend, can serve in this role for you. You can even designate more than one person, assigning different responsibilities to each. ²

The power of attorney can go into effect upon your incapacitation or any other triggering event you specify. Individual states have various power of attorney laws, so it’s important to become familiar with your state’s specific regulations to make an informed decision. ²

There are also several different POA designations, so it’s best to become familiar with what is involved with each one – as well as when a certain designation may be needed.

General Power of Attorney: An agent under this agreement can serve any needs, as your state allows. They can do things like sign checks, sell property, pay bills or make bank deposits and withdrawals. A key limitation of a general POA is that it is no longer effective if the principal becomes incapacitated. Due to this, a general POA might be most effective for short-term needs or specific tasks.

Durable Power of Attorney: A durable POA will remain in effect even if the principal becomes incapacitated, allowing the agent to continue to make decisions when the principal is unable to do so. A durable POA remains in effect from the day it is executed and through the principal’s incapacity. This type of POA can ensure a seamless transition in decision making should the principal become incapacitated.

Limited Power of Attorney: An agent under this agreement can serve specific legal needs for limited timeframes.

Healthcare Power of Attorney (HCPA): Also known as a medical power of attorney, this document appoints someone to make medical decisions for you if you are incapacitated and ensures that your healthcare preferences are respected – even when you cannot communicate them. A HCPA is typically a spouse or family member who you trust, and who would likely recommend a course of action you would agree with. A backup agent should also be identified, in case your initial choice is unavailable or unable to act at the time needed.

What are the benefits of a POA and why have one?

• Protect your interests now: Since a POA can only be executed when you are of sound mind, you can tailor your POA to your specific requirements and designate matters to continue to be handled as you currently wish in the present.
• Ensure someone you trust will handle your affairs: Establishing a POA allows you to select a trusted person as your agent, giving you confidence in how your affairs will be handled. The agent will be making critical decisions and advocating on your behalf, therefore you’ll want to choose someone who shares your values and who will act as you would have.
• Ease the burden should the unexpected happen: A POA provides clear direction on how decisions should be made and who is responsible for making them, thereby reducing conflicts and feelings of uncertainty among family members. It also provides reassurance that the principal selected an agent who is capable of honoring their wishes and acting in accordance with their values.

Creating a power of attorney is an important aspect of estate planning that will protect your wishes and the assets you’ve worked hard to grow over the years. No matter what your age or your stage in life, getting your affairs in order and your records organized is an essential part of financial planning. Estate planning can be complex, and the specific documents needed may vary based on your individual circumstances. It’s wise to consult with an attorney who specializes in estate planning to create a plan that aligns with your goals and complies with local laws. You’ll also want to make sure your financial planner knows the details of your estate plan. By including these details in your financial plan, you can ensure your end-of-life wishes will work as you intended.

Should you be thinking about your financial future and retirement, as well as estate planning – the First Financial Investment & Retirement Center will be hosting an exclusive no-cost virtual seminar on the Transitions to Retirement featuring a bonus segment on Estate Planning, on Wednesday, October 8^th at 6pm.

(697533-1 and 622155)

You can also register for this session by contacting Maureen McGreevy, LPL Financial Advisor at 732.312.1534 or emailing maureen.mcgreevy@lpl.com

Securities and advisory services are offered through LPL Financial (LPL), a registered investment advisor and broker/dealer (member FINRA/SIPC). Insurance products are offered through LPL or its licensed affiliates. First Financial Federal Credit Union (FFFCU) and First Financial Investment & Retirement Center are not registered as a broker/dealer or investment advisor. Registered representatives of LPL offer products and services using First Financial Investment & Retirement Center, and may also be employees of FFFCU. These products and services are being offered through LPL or its affiliates, which are separate entities from and not affiliates of FFFCU or First Financial Investment & Retirement Center.

Securities and insurance offered through LPL or its affiliates are:

This material is for general information only and is not intended to provide specific advice or recommendations for any individual. For individual estate planning advice, consult with an estate attorney.

Sources:

1 Forbes.com, November 19, 2024

2 Investopedia.com, March 23, 2023

LPL tracking #’s referenced: 676252, 513868, 653950