As we Americans live longer, we increase our chance for suffering dementia or other mental incapacity in our waning years. You will be shocked to know that 50% of people age 85 and over have Alzheimer's. You must decide before hand to whom you will give the power to handle your affairs when that happens - or even before as you become increasingly unsure of your own judgment. Therefore, mental incapacity is essential to address in your estate planning. For this and a number of other reasons, we hope you see that estate planning is not just for the rich.
The person you select as your "attorney in fact," the person that will act on your behalf, can be your adult child or anyone else; but you should trust him or her implicitly. You give this power by forming a "power of attorney" - through a document - whereby you select a person to act for you. But be sure you assign the type of power you want that person to have. Let's consider the different types of power.
A power of attorney may be a limited power of attorney, restricted to one specified act or type of act. Or it may be a general power of attorney entitling that person to make all your decisions.
If you grant the power of attorney to take effect before you are mentally incapacitated, under the common law, it becomes ineffective when you become "incapacitated." If specify that the power should continue with the selected person, it is called a durable power of attorney.
In some states, a durable power of attorney can also be a "Health Care Power of Attorney" or "living will" that empowers the attorney-in-fact to make health care choices for you, up to and including terminating care that keeps a critically and terminally ill patient alive. New York State has enacted a Health Care Proxy law that requires a separate document be prepared appointing one as your health care agent.
In some states it is possible to grant a springing power of attorney. This power only takes effect after you become incapacitated. After that, it is identical to a durable power, but cannot be activated before incapacity -- it only "springs into actions" upon incapacity. Use it to allow a spouse or family member to manage your affairs in case illness or injury makes you unable to act. If a springing power is used, you should specify exactly the event that causes the power to spring into effect.
Unless you make the power of attorney irrevocable, you may revoke the power of attorney by telling the attorney-in-fact that it is now revoked. You should then notify others that the power was revoked, especially those who the attorney-in-fact may have contacted representing himself as your agent.
Some individuals who have acquired a power of attorney unscrupulously waste or steal the assets of vulnerable individuals such as the elderly. You have surely heard of this type of elder abuse. If you are unsure of how well someone will handle your affairs, you may want to grant him power of attorney only for a while to see how he or she does. If you have any doubts about an individual's integrity, make a different choice.