THE MOST IMPORTANT ESTATE PLANNING DOCUMENT IS NOT YOUR WILL.

When people think about estate planning, they usually start thinking about their will. But I would argue that a will is – in most cases – the least important estate planning document. A will determines who receives your property after you die and who oversees the administration of your estate. A will has no effect while you are still alive. The most important estate planning document is effective while you are still living and allows your loved ones to step in and help you exactly when you need it. Without this document, your family has to petition the court for guardianship, a long and costly process. This document is your financial power of attorney.

Your power of attorney helps when you cannot make decisions for yourself, but it also allows your agent to help you as a matter of convenience. And incapacity — even temporary incapacity from an accident, injury, or illness — is far more likely to disrupt your life than death is to end it without warning. Keep reading to learn what a power of attorney is and why it is so important.

Disclaimer: This blog post is for general educational purposes only. It is not legal advice and is not intended as a substitute for legal advice. If you have questions about planning for your incapacity or a financial power of attorney, you should consult with a qualified estate planning attorney.

WHAT A FINANCIAL POWER OF ATTORNEY DOES

A financial power of attorney is a document where you, the principal, name someone you trust — your agent — to manage your financial and legal affairs on your behalf. Your agent can pay your mortgage, access and manage your bank accounts, file your taxes, deal with your insurance company, and sell property if it needs to be sold, among many other things. Everything you may normally handle yourself, your agent can handle for you.

HOW IT PROTECTS YOU

A financial power of attorney allows you to appoint someone to help you manage your financial and legal affairs without changing the ownership of your property. This part is critical, because adding a child as a joint owner on your financial accounts for the purpose of helping you pay bills can have significant consequences most people don’t anticipate. For one, adding a child as a joint owner on your bank account means that, legally, your child owns the funds in the bank account and can do whatever they want with them. If the child gets divorced, the funds in your bank account could be jeopardized by the division of marital assets. Your child can withdraw money from the account without asking and does not have to use it for your benefit. When you pass away, the child receives the balance of the account even if your will states otherwise. If you require Medicaid long-term care assistance, adding the child as an owner to your account could be seen as a gift, triggering Medicaid’s 5-year look back rule and delaying your access to benefits.

A power of attorney allows your child to help you without giving them ownership of your assets. As an agent under the power of attorney, your child must act in your best interest at all times and cannot use your money for their own benefit unless you want them to. They have a legal duty to act loyally, honestly, and transparently, all for you. Simply adding another person as a joint owner on your bank account does not create these additional legal duties.

Additionally, not all financial issues can be solved by adding another person as a joint owner on a bank account. For example, you cannot add another person as a joint owner on a qualified retirement account such as an IRA or 401K. If you need help managing your health insurance, your child cannot talk to the insurance company on your behalf without a power of attorney. If your family needs to hire an attorney on your behalf, they may need a power of attorney.

Adding a child to your bank account sounds like an easy solution. But it is a risky, imperfect solution that can create more problems than it solves. A power of attorney makes sure you and your family are not left unprepared in your most vulnerable moments.

WHAT HAPPENS WITHOUT ONE

If you become incapacitated without a financial power of attorney in place, your family can't simply step in to handle things for you. They have to petition the court for guardianship, a formal legal proceeding where a judge decides who manages your finances and how closely the court will supervise that person going forward.

That process is public. It's slow, often lasting weeks or months, not days. It requires medical evidence of your incapacity, notice to your family members, and usually a lawyer on top of court costs. If your family can’t agree who should be your guardian, the process becomes even more prolonged, costly, and complicated. Once a guardian is appointed, they typically report to the court annually and need court permission for certain transactions. Your family is managing your life, but the court is looking over their shoulder the entire time. And if you don’t have a power of attorney already in place, you may not get a say in who your guardian is.

Compare that to an agent under a properly executed power of attorney. The moment you need their help, whether you are in the hospital after an unexpected illness or fall, or suffering from Alzheimer’s or dementia,  they can step into your shoes right when you need them to.

PENNSYLVANIA'S FORMALITIES ARE NOT OPTIONAL

Pennsylvania tightened the requirements for financial powers of attorney several years ago, but it is still common to see documents— often downloaded from generic online templates or drafted with AI — that don't meet them. Miss any of the statutory legal requirements, and your financial power of attorney is not legally valid. A bank or title company can reject the document when your agent attempts to use it.

THE BOTTOM LINE

If you take away one thing from this post, take this: a will protects your family after you're gone while a power of attorney protects you and your family while you're still here. Most people put off signing one because incapacity feels like a distant, hypothetical problem. It isn't, and you don’t have to lack the ability to make decisions for yourself to need someone’s help. It happens suddenly, and when it does, the difference between having this document and not having it is the difference between your agent handling things at the bank this afternoon or your family standing in front of a judge next month. You also don’t have to know how you want your entire estate handled to get a power of attorney in place. While many people delay in signing a will because they have trouble deciding where they want their property to go when they die, your power of attorney solves a completely different problem: who is going to help you while you are living.

If you don't have a financial power of attorney — or you have one that's more than a few years old, drafted in another state, or downloaded from a template site — let's talk about your specific situation and whether it still does what you need it to do. And if you would like to learn more about financial powers of attorney, check out my free guide here.