For most people, a comprehensive estate plan will include three documents: a will, an Enduring Power of Attorney (“EPA”), and a Personal Directive (“PD”).

Unlike a Power of Attorney that is available at many financial institutions that has limitations, an EPA nominates someone (your named Attorney) to take over the management of all your financial affairs and property. You can also choose to activate an EPA without losing capacity, as long as you have an appropriate clause included in the document.

Your PD nominates someone (your named Agent) to make medical care decisions on your behalf at such time(s) as you are unable to do so.

A complete estate plan not only deals with your assets after death (your will) but it also includes two very important documents that will affect you while you are alive (your EPA and Personal Directive).

When does an Enduring Power of Attorney come into play?

As noted above, your Enduring Power of Attorney (“EPA”) is typically activated when you lose the capacity to manage your personal property and financial assets. This is known as a Springing Power of Attorney. Conversely, an immediate EPA can also be prepared. In such cases, the attorney would assume responsibility for the donor’s assets immediately.

Your EPA is a very important part of your estate plan for many reasons. First, because the donor is still alive, the attorney will be responsible for a variety of activities ranging from collecting your pension income, to preparing and filing tax returns, paying for personal care services and in some cases, even selling your home. Simply, your attorney will also be responsible for managing all your assets which should make it evident that who you appoint as your Attorney is just as important as who you appoint as your executor. Given the importance of your EPA and the possibility that this document remains active for years due to a prolonged health event, it is imperative that a well-drafted EPA include a wide range of clauses that are reflective of your greater estate plan.

When does a Personal Directive come into play?

A Personal Directive (“PD”) is the other essential document. Your agent in the PD will have broad authority over making health care decisions on your behalf when you are no longer able to. Your agent’s responsibilities may include decisions on where you live, the standard of care you receive, who you associate with and even discretion over a do-not-resuscitate provision.

An unfortunate reality is that many people who have been nominated as an agent have never had a meaningful discussion with the donor about the kind of medical care and treatment the donor would or would not want to receive. Because every health event cannot be anticipated, Personal Directives are typically rather broad and require the agent to exercise considerable discretion. So even though it is not always easy, it is very important to have a serious discussion with your appointed Agent about this topic. Your Personal Directive could have significant effects once activated, so, just like your executor and your Attorney, your choice of Agent is extremely important and warrants careful consideration.

What if I don’t have an Enduring Power of Attorney or Personal Directive?

When you don’t have an Enduring Power of Attorney, your family, or someone else acting on your behalf, will have to make an application under the Adult Guardianship and Trusteeship Act for an Order of Trusteeship to take over the management of your financial affairs and property. In such cases, a Trustee will be appointed and they will be bound by several, often onerous, reporting obligations.

The same is true when you don’t have a Personal Directive: an application has to be made to the Court for an Order of Guardianship. In all cases, these applications involve a public process that takes time, costs a lot of money, and perhaps most importantly, gives you no say in the outcome.

An effective estate plan will provide great peace of mind

Estate planning is not just for people who are older or wealthy. It applies to everyone, and the sooner you start working on your estate plan, the better prepared you will be. It is often said that there is no perfect estate plan as taxes and costs cannot be eliminated even with the most thoughtful plan. Nonetheless, what such planning can do is provide you, your loved ones and beneficiaries with the peace of mind that a plan exists and it details your objectives.