Small Bites Podcast: Power of attorney

In this episode of Small Bites of Business Insights, Hosts Dr. Kathy Gosser and Rebecca McDade, J.D., focus on the use of power of attorney for property and healthcare maintenance. The hosts emphasize the need to choose trustworthy agents and align decision-making with personal preferences for financial and medical matters.

Hosts:
Dr. Kathy Gosser, YUM! Assistant Professor of Franchise Management and Director of the Yum! Center for Global Franchise Excellence

Rebecca McDade, JD – Attorney

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Transcription

(NOTE: This is an automated transcription and not intended to be used as a substitution for listening to the podcast recording. Simply click on the player above and receive the full benefit of the conversation.)

And here we are with another Small Bites of Business Insights Talking Wealth Planning. I have Becca with me and we’re going to do estate planning basics, part three. So Becca, we’ve talked about what estate planning is, we’ve talked about a will, we’ve talked about a trust, but there’s more. When you’re looking at your estate, there are more things to consider.

So welcome back, Becca. Thank you so much. Happy to be here. Always glad to have you. So let’s talk about these terms like power of attorney. Can you tell us what that’s all about? So a power of attorney for property, it’s a document that allows somebody to manage your property, your assets, if you become disabled during your lifetime.

So a power of attorney. Is only valid during your lifetime and the way it works is you fill out a form that’s called the power of attorney for property And you name an agent and the agent is the person who if you become disabled Is going to be able to write checks for you Pay your mortgage, pay your bills, run your business, um, do all of the things with your financial assets that you would do if you were not disabled or incompetent, um, depending on how your state defines it.

And that agent. Has the power of attorney for property gives to the agent specific duties that that agent can do and cannot do. Okay. Do people usually choose their spouse or who do they choose? Normally, I’m going to name my husband. So yes, I would choose my spouse. And then I can name a successor and I think it’s a smart thing to name a successor.

And that can be adult children. Or it can be other family members or friends that you feel comfortable with. I do think that whomever you name needs to be financially savvy. So if my husband is the spendthrift in the family and is not very good with money, then I probably am not going to name him as my agent under the power of attorney for property.

It’s going to be a hard discussion, but I’m not going to name him. Um, I know I might name my sister in that case, but you really want somebody that you will trust to manage your wealth in the same manner that you would do it if you were able to. That makes sense. And I know as a lot of parents get older, they tend to provide this.

Power of attorney or for property. What are their children to one of their children or two, as you said, another family member or friend, because as you get older, you’re just not quite sure what’s going to happen. Is that fair? That is fair. Um, some states will allow, like in the parent situation will allow you to name more than one person to act at a time.

So if I’ve got three children, I could name all three and they have to. Act together to make financial decisions. Other States say that you can only name one person at a time. So the fewer people you have, though, acting the easier it is to make decisions and be nimble. That’s true. I can definitely see that.

So you have the power of attorney for property, which makes total sense. They can sign on your behalf, make your financial decisions. What about the power of attorney for health care? So the power of attorney for health care is one that, um, when I started practicing 35 years ago, I think it was more of a, not a throwaway, but a simple form that no one really thought about.

And it’s become much more important over time. So the power of attorney for healthcare allows you to again, name an agent who’s going to make medical decisions for you if you’re unable to do so for yourself. So it may be that you’ve become. Yeah. Incompetent or incapacitated, it might be that you’re in a coma, it might be that you have Alzheimer’s or some other mental condition that doesn’t allow you to manage your own health.

The power of attorney for health care can also give to your agent the right to make life and death medical decisions for you. One of the things that we’ve noticed over time is that doctors are wanting a power of attorney for healthcare to specifically talk about conditions and what the agent can do.

So, when I first started practicing, I’d fill out the form, I’d give my agent the power to make medical decisions for me, and if they had to make, um, like, should I have a feeding tube or not have a feeding tube, um, should I have this procedure or not, the doctor was just taking the agent’s decision as what the doctor should be doing.

What we’re seeing now is doctors saying, well, if the power of attorney doesn’t specifically say. that you can use a feeding tube, then I’m not going to use a feeding tube as part of treatment. So the power of attorney for healthcare has become a much more important and robust document than it was 30 years ago.

Oh, interesting. And who’s the best person to choose there? So you’re going to want someone who’s going to make medical decisions that you would make. If you’re the kind of person. That wants the plug pulled no matter what, and your spouse is the person who wants to keep you going until the cows come home, then you’re not going to want to name your spouse.

You’re going to want to name someone who will make the medical decisions that you would make for yourself. Oftentimes that is a spouse, but sometimes it’s not the same thing when you’re looking at children, you can name a child, um, or children as your agent, but you want to make sure that they are viewing your medical treatment the same way you would do so.

That makes sense. And you know, this is a burden actually. Especially in the example you talked about, where if one spouse just could never pull the plug, but the other one would want that to happen, it is a burden. And so you could remove that burden by choosing someone else and knowing, knowing that about your spouse, you could actually do that person a favor.

Absolutely. And I think before you name your agent for the healthcare power, it makes a lot of sense to have a conversation with them. Whatever your if is and how would you respond to it so that you know that you’re naming the right person? I have had client situations where somebody has actually wanted the plug pulled Did not have that conversation before, um, and ended up being in a coma for 10 years in a, you know, in a state that they would not have wanted, particularly because one of their goals was ensuring that they were leaving as much of their wealth as possible to their children.

And over that 10 year period, money was going towards their medical care. That’s just one person’s view. Um. That’s why this one’s important and I don’t think folks think about it because we tend to think about where are our assets going to be distributed? How’s that going to work? But we forget about this important component.

And um, obviously it helps if you have someone in your family or your friendship network that has some type of healthcare experience, that also would be a plus. It would. It would. So then there is this thing called the advanced directive or the living will. Can you tell us what that is? People often execute an advanced directive or a living will in conjunction with the power of attorney for health care.

And the advanced directive or a living will has really one purpose. And that is to tell the doctor, yes, I want life sustaining treatment or no, I don’t want life sustaining treatment. The advanced directive. Um, in some states trumps the power of attorney and in other states it’s reversed, but the advanced directive ties entirely to your choice with respect to life sustaining treatment.

Which is really, again, it gives you the control and you can make the decision when you’re of sound mind. Absolutely. And I think that. What we’re finding is that doctors prefer the advanced directive to the power of attorney for health care when it comes to life sustaining treatment, just because it is you saying under these circumstances, I want you to pull the plug or no, I want you to keep trying to find the solution and extend my life.

Yeah, that’s an interesting thing to sign. And I know probably with that, we haven’t talked about this, but you. You also probably want to make sure you’ve made your decision about organ donation, so that that’s a part of that as well. Yes. And again, it gives you, I mean, each of us have that right to make those decisions, which is the beauty of living here is that we can, we can decide that.

One thing, because you mentioned organ donation, so, um, some advanced directives and living wills do allow for that. Uh, the power of attorney for health care often has a section that deals with organ donation. The other thing is, if you don’t have either one of these, and organ donation is important to you, remember that you can also usually do it through the Secretary of State’s office.

With your state. That’s true. Oh, that’s a good plug. That is a real good plug. Thank you So I know that organ donation is kind of important to me I have a friend who was able to save four lives. So it’s it’s pretty incredible. I have to put that’s amazing It is it is amazing, but let’s move to talk about transfer taxes But I think we’re gonna pick that one up on another podcast But why don’t you just give us a brief overview of what that is Becca?

So, the transfer tax is a tax that the IRS assesses on your right to transfer your assets to beneficiaries either during your life or at death. Oh my gosh, this is going to be a complex one. We need a whole, a whole separate Small Bites for this and that’s what we’re going to do next.