As a goal-oriented person, I don’t truly begin my day until I open a notebook and draft a list of items to be completed in the coming hours. “To-do” lists keep us organized and help us make sure not to overlook important tasks. When evaluating your retirement planning to-do list, inadvertently leaving an essential element unchecked is not an option.
On the list of retirement planning necessities, the most prevalent topics involve the finances of retirement. While financial concerns should be at the top of every individual’s retirement planning list, they are not the only issues meriting consideration. A comprehensive retirement and estate plan should address practical retirement needs in addition to the obvious financial concerns.
This is an Opinion
Two legal documents addressing these practical needs in a retirement plan are a power of attorney and a health care power of attorney. Although often overlooked by those planning for retirement, these documents can be vital in carrying out fundamental tasks in your retirement.
In general, a power of attorney is an instrument granting someone the right to act as agent on your behalf. These instruments allow you to decide now who will act for you should your mobility or capacity be diminished in the future. You should select individuals you trust to make important decisions regarding your health, finances and well-being should you be unable to act for yourself. People often select family members under their powers of attorney for health care and select individuals adept in business matters under their general powers of attorney. If you have not chosen in advance who is to make these decisions, your family could face the difficult and frustrating task of going through the court system to seek authority to act in your stead. A power of attorney could be a matter of necessity or simply a matter of convenience. Whatever your circumstances, the procedure is always easier if handled before the need arises.
Powers of attorney can vary in form and function. A power of attorney can be ordinary or durable. An ordinary power of attorney becomes ineffective upon the incapacity of the grantor, while a durable power of attorney will continue to be valid upon the grantor’s incapacity. Both types terminate upon the death of the grantor. Powers of attorney can also be drafted to become effective immediately or at some point in the future, most often upon the incapacity of the grantor.
A power of attorney can be limited to allow a person to complete a restricted set of tasks on your behalf or can be drafted to allow an agent to take any action in your name that you could do yourself. Regardless of the type, your agent will be required to follow the instructions you outline in your powers of attorney.
Although some tasks can be completed without a power of attorney, many important matters require evidence of your agent’s authority to act on your behalf. A power of attorney will most certainly be required when preparing and filing tax returns in another’s name or when asking questions of a bank regarding another’s accounts. If you want a certain party to make health decisions on your behalf, that party will also need evidence to show that he or she has been selected as your surrogate decision-maker.
While health and other matters can theoretically be covered in one power of attorney, it is advisable for practical reasons to keeps these powers separate. A health care power of attorney may outline specific guidelines your agent must follow in making decisions regarding your health care. These instructions are likely to include health information that you may prefer to keep private. This information will be seen by any party presented with the power of attorney as evidence of your agent’s ability to act on your behalf. Even if the privacy issues do not concern you, keeping health matters separate from other matters alleviates any potential confusion when using powers of attorney. For this reason, separate powers of attorney for health care and all other matters are the norm.
Through the creation of a comprehensive retirement plan including powers of attorney, you can rest easily knowing that you are prepared both financially and otherwise to enjoy your retirement.
Kayleigh C. Dulaney is a tax attorney with the Wright Lindsey & Jennings law firm in Little Rock. Email her at KDulaney@WLJ.com.