This article is part of the Professional Advisor Insights series.
We all know that life can change in an instant. One day we’re enjoying a family vacation or paying our bills. The next finds us in an emergency room, incapacitated by an accident or illness, perhaps even unconscious.
When people don’t establish a Power of Attorney (POA), avoidable and costly complications can arise.
A vacation in particular can be unexpectedly life-changing as people are exploring and venturing out to unfamiliar places. This is prime time for a sudden twist of fate.
Most of us don’t like to think about this. It’s grim to consider what might happen if we could no longer take care of routine matters, much less make significant decisions. Which is why creating a POA is not only essential, but also brings peace of mind.
Absent an existing POA, the costs and delays of setting up a guardianship can compound an already difficult situation. That’s why we are here to say: “Just do it!”
What is a power of attorney?
A power of attorney (or letter of attorney) allows you to designate a person or organization to handle your legal, financial, or health care matters if you’re unable to take care of them yourself.
To illustrate, let’s imagine a few scenarios in which a POA is MIA.
- A single adult child age 19 is hospitalized and unconscious in another state. The frantic parents call the hospital. Under strict HIPPA restrictions, the hospital can neither discuss nor disclose whether the child is even there. Because the parents are no longer legal guardians (the child is 18 or older), and the child didn’t create a POA naming the parents, their hands are tied. They must search for remedies elsewhere.
- A husband, a successful corporate executive, is seriously injured by a drunk driver. He is in a coma. He has stock options worth tens of thousands of dollars. They will expire in the next two weeks if not exercised. His wife does not have a financial POA from her husband. The options expire, worthless.
- An unmarried adult is hospitalized and unable to make decisions. There is no health care POA, so doctors don’t know who can authorize important and critical surgical procedures. This causes a delay and jeopardizes the health of the adult.
Establishing a Power of Attorney is relatively simple, considering the consequences of not doing so. We encourage everyone to contact their attorney to discuss this smart estate planning tool.
About Paul J. Hynes, CFP®
Paul Hynes is a Certified Financial Planner (CFP®) and financial advisor with more than 30 years of experience. Paul is the founder, President and CEO of HearthStone | Private Wealth Management, a fee-only investment advisory and financial planning firm based in San Diego, California. Learn more at http://www.hearthstoneinc.com/.