For many of us, Estate Planning is the ‘elephant in the room’ – an obvious but a debatable topic that needs addressing. Estate planning is essential if you wish to secure the future of your loved ones. Reportedly, 77% of Americans believe estate planning is essential for everyone. However, it is a broad subject, and you require considerable effort to get acquainted with it.
A living will and a power of attorney are two crucial aspects that constitute an estate plan, but people often use them interchangeably. Hence, it is vital to understand the crux of Power of Attorney vs. Will. Let us understand the difference between a living will and power of attorney example, their significance, and the appropriate situation to utilize the documents.
What is Living will?
A Living Will is a legal document that encompasses your medical preferences – the medical care an individual wants to receive and the ones they don’t want to receive when they cannot do so. A Living Will states end-of-life decisions for different procedures, such as resuscitation, ventilation, and dialysis. Besides, the person can even appoint a healthcare agent or a proxy to make medical decisions if they cannot speak for themselves.
Besides, nowadays, you can create an online will with minimal time and effort and add it to your estate plan.
The importance of living will
A living will is crucial and helps to convey your end-of-life decisions in advance. The following are the benefits that prove the importance of living will:
- As the Living Will outlines your medical preferences and decisions in advance, it reduces the burden for your loved ones. Also, it clears the air and avoids any possible misunderstandings or guesswork.
- Moreover, as the individual defines the decisions beforehand, it renders peace of mind to you and your loved ones.
- In case of any severe illness, an accident, or surgical procedure, the doctors can refer to the living will and know whether you prefer any life-sustaining procedures like a ventilator, a feeding tube, or CPR(cardiopulmonary resuscitation) and antibiotics for treatment.
- Above all, you can even arrange funds for your medical care in advance. Thus, reducing the financial burden on your loved ones.
Moreover, a living trust is a legal document that involves the management of an individual’s assets if incapacitated. Given that, a living will and a living trust are different as they deal with different aspects. While a living will outlines the medical decisions of the individual, a living trust details the management of their assets. When the individual is incapacitated, the trust becomes the owner of the individual’s assets.
In a living trust, the individual appoints a trustee or a person capable of managing the assets. Besides, living trusts end on the death of the individual.
What is power of attorney?
A power of attorney, also called the POA, is a legal document that authorizes a designated person to make decisions for someone else. The individual is called the principal, and the designated person is the agent or attorney-in-fact. Moreover, depending on the type of power of attorney, the agent may have a broad or limited scope. The principal transfers the authority to the agent, either on a temporary or permanent basis, to make either general, financial, or medical decisions on the principal.
The principal can opt for a power of attorney in case of illness or if the principal is living overseas and cannot be available to sign the documents themselves. Furthermore, you can obtain a POA online or through a lawyer. A POA can end on the principal’s death if it is invalid or the agent cannot carry out the responsibilities.
1. General power of attorney
A general power of attorney bestows the agent with broad powers, including financial and real estate decisions. Above all, a power of attorney ends when the principal is incapacitated.
2. Durable power of attorney
Unlike a general POA, a durable power of attorney is pertinent when the principal is incapacitated.
3. Medical power of attorney
A medical power of attorney authorizes a designated person to make medical decisions on the principal’s behalf when the latter cannot do so. Moreover, the agent can make decisions related to medications and procedures like hydration and tube feeding. Also, making arrangements for future assisted living, nursing home, and rehab care.
4. Financial power of attorney
A financial power of attorney assigns financial powers to the agent and makes decisions on behalf of the principal. Furthermore, the agent can manage bank transactions, add or change beneficiaries, sign checks, collect and settle debts, pay bills, and file tax returns.
Importance of power of attorney
- As financial and medical power attorneys are defined in the document, it renders peace of mind to your and your loved ones.
- The durable power of attorney is still applicable when the principal is incapacitated. Hence, a POA helps to plan your future well in advance in the face of uncertainty.
- Moreover, POA helps to secure your assets from third parties as you authorize the agent to handle bank transactions and real estate, pay bills, and collect debts from creditors.
Power of attorney or living will? What do you need?
If you have a detailed plan enlisting your healthcare preferences or are suffering from a severe illness, you should create a living will. On the other hand, if you aren’t specific about your medical preferences, then creating a power of attorney is a feasible option. A living will and power of attorney benefit an individual, as it helps someone else to make decisions and perform their duties on your behalf, even if you are incapacitated.
Also, a combined advanced directive – a combination of a living will and a power of attorney is an excellent option to include in your estate plan. Moreover, the document outlines your end-of-life decisions and a designated person to make your decisions.
Can a power of attorney override a living will?
No, a power of attorney cannot override a living will unless the principal exclusively gives the POA the authority to override the Will. So, the agent must always act in the interest of the principal.
The discussion of living will vs. power of attorney is subjective. Moreover, deciding between a living will or power of attorney depends on your preferences and plan. So, there isn’t a predetermined solution that answers individual queries. Hence, you should assess your requirements and plan for either of these options or a combined advance directive(that includes both).
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