What Happens If I Can't Make Decisions for Myself?

Life is unpredictable, and there may come a time when you are unable to make financial, medical, or personal decisions for yourself due to illness, injury, or cognitive decline. Without proper legal planning, your loved ones may face complicated legal processes to manage your affairs. This is where a power of attorney (POA) and trusts play a crucial role. These legal tools allow you to designate trusted individuals to handle your matters, ensuring your interests are protected.

If you want to secure your future and avoid legal complications, working with an experienced estate planning attorney can help you establish the right documents. Contact us today by using our online form or calling 414-253-8500 to discuss your options.

The Role of a Power of Attorney (POA)

A power of attorney (POA) is a legal document that grants another person (the "agent" or "attorney-in-fact") the authority to make decisions on your behalf. There are different types of POAs, each serving a specific purpose.

Types of Powers of Attorney

1. Financial Power of Attorney

   • Allows your agent to manage your financial affairs, including paying bills, handling investments, and managing real estate.
   • Can be immediate (effective upon signing) or springing (effective only when you become incapacitated).

2. Medical Power of Attorney (Healthcare Proxy)

   • Authorizes your agent to make medical decisions if you are unable to do so.
   • Often works in conjunction with a living will to specify your healthcare preferences.

3. Limited Power of Attorney

   • Grants authority for specific tasks, such as selling property or handling a single financial transaction.
   • Ends once the specified task is completed.

4. Durable Power of Attorney

   • Remains in effect even if you become incapacitated.
   • A crucial tool for long-term planning, ensuring a trusted individual can handle financial and medical matters.

What Happens If You Don't Have a POA?

If you do not have a power of attorney and become incapacitated:

• Your family may have to petition the court for guardianship or conservatorship to manage your affairs.
• This process can be time-consuming, costly, and stressful for your loved ones.
• The court, not you, decides who will manage your financial and medical decisions.

How Trusts Can Help Manage Your Affairs

A trust is a legal arrangement where a trustee holds and manages assets on behalf of beneficiaries. Trusts can help you retain control over your assets and provide instructions for their management if you become incapacitated.

Types of Trusts for Incapacity Planning

1. Revocable Living Trust

   • Allows you to maintain control of your assets while you are alive and designate a successor trustee to step in if you become incapacitated.
   • Avoids probate and ensures a smooth transition of asset management.
   • Can be updated as your circumstances change.

2. Irrevocable Trust

   • Transfers ownership of assets out of your name, offering asset protection and potentially reducing estate taxes.
   • A designated trustee manages the assets, ensuring they are used according to your wishes.

3. Special Needs Trust

   • Designed for individuals with disabilities to ensure they receive financial support without jeopardizing government benefits like Medicaid or Supplemental Security Income (SSI).

4. Medicaid Asset Protection Trust (MAPT)

   • Helps individuals qualify for Medicaid while preserving assets for their heirs.
   • Protects assets from being used to pay for long-term care expenses.

By establishing the right type of trust, you can ensure that your assets and financial affairs are managed according to your wishes without requiring court intervention.

Choosing Between a Power of Attorney and a Trust

Both powers of attorney (POAs) and trusts play essential roles in incapacity planning, but they serve different functions. Understanding their differences can help you determine which is best for your situation-or whether you need both.

Key Differences Between a POA and a Trust

Feature	Power of Attorney (POA)	Trust
Purpose	Authorizes an agent to act on your behalf	Manages assets for your benefit
Scope	Covers financial or medical decisions	Controls assets placed in the trust
Effectiveness	Ends at death or revocation	Can continue beyond death for asset distribution
Court Involvement	May require court approval if challenged	Avoids probate and court involvement
Best Used For	Short-term decision-making	Long-term asset management

When Should You Use a POA?

A power of attorney is ideal for handling financial transactions, healthcare decisions, and legal matters in case you become incapacitated. It allows someone you trust to step in and manage your affairs without needing court approval.

When Should You Use a Trust?

A trust is best if you want to:

• Ensure a smooth transition of asset management if you become incapacitated.
• Avoid probate and simplify the transfer of assets after death.
• Protect assets from creditors, lawsuits, or long-term care costs (depending on the type of trust).
• Provide for minor children, family members with disabilities, or loved ones who may not manage money well.

Why Many People Use Both

Many individuals establish both a POA and a trust to cover all aspects of incapacity planning. A revocable living trust can manage assets, while a durable POA ensures that non-trust matters (like paying bills or making healthcare decisions) are covered.

Steps to Take for Incapacity Planning

Planning ahead can protect your interests and reduce stress for your loved ones. Here are the steps to take:

1. Choose a Trusted Agent or Trustee

• Select someone responsible, trustworthy, and capable of making financial or medical decisions.
• Consider naming a backup agent or trustee in case your first choice cannot serve.

2. Create the Necessary Legal Documents

• Establish a durable power of attorney for financial matters.
• Draft a medical power of attorney and a living will to clarify your healthcare wishes.
• Set up a revocable living trust if you want continuous asset management in case of incapacity.

3. Fund Your Trust (If Applicable)

• Transferring assets into a trust is essential for it to be effective.
• A trust that isn't properly funded won't provide the intended protections.

4. Communicate Your Wishes

• Discuss your plans with your chosen agents, trustees, and family members.
• Provide copies of important documents to relevant parties, including financial institutions and healthcare providers.

5. Review and Update Your Plan Regularly

• Major life changes (marriage, divorce, having children, etc.) may require updates to your estate plan.
• Review your plan at least every few years to ensure it reflects your current wishes.

Avoiding Legal Complications and Family Disputes

Without clear legal documents in place, families often face disputes, legal battles, and unnecessary expenses when a loved one becomes incapacitated. Some potential issues include:

• Contested Guardianships - If no POA is in place, multiple family members may seek control over financial or medical decisions, leading to court battles.
• Frozen Assets - Without a trust or POA, banks and financial institutions may refuse access to accounts, preventing bills from being paid.
• Disagreements Over Medical Care - Family members may argue over treatment options if your wishes aren't legally documented.

By planning ahead, you can avoid these challenges and ensure that your wishes are respected.

Contact an Estate Planning Attorney for Help

Preparing for the possibility of incapacity is one of the most important steps you can take to protect yourself and your family. A well-drafted power of attorney and trust can ensure that your financial and medical affairs are managed according to your wishes.

At Heritage Law Office, we help individuals and families create customized estate plans that provide security and peace of mind. Contact us today by using our online form or calling 414-253-8500 to schedule a consultation.

Frequently Asked Questions (FAQs)

1. What happens if I don't have a power of attorney or a trust?

If you become incapacitated without a power of attorney (POA) or trust, your family may have to go through the court system to obtain guardianship or conservatorship. This process can be time-consuming, expensive, and emotionally stressful. Additionally, the court-not you-will decide who manages your finances and medical decisions.

2. Can a power of attorney override a trust?

No, a power of attorney does not override a trust. A trustee has control over assets in the trust, while an agent under a POA can manage assets that are not in the trust. If you have both documents, they should be carefully coordinated to avoid conflicts.

3. What is the difference between a durable and a springing power of attorney?

A durable power of attorney takes effect as soon as it is signed and remains in effect if you become incapacitated. A springing power of attorney only becomes effective if you become incapacitated, which may require a doctor's certification. Many people prefer a durable POA to avoid delays in accessing financial accounts or making decisions.

4. Can I name multiple people as my power of attorney?

Yes, you can name multiple people as co-agents in a power of attorney, but this can sometimes lead to disputes or logistical challenges if they disagree. Alternatively, you can name one primary agent and a backup (successor agent) in case the first choice is unavailable.

5. How often should I update my power of attorney and trust?

You should review and update your power of attorney and trust every few years or when a major life event occurs, such as marriage, divorce, birth of a child, or significant financial changes. Keeping these documents current ensures they accurately reflect your wishes and the right people are in charge of your affairs.