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Most likely you already know that a Power of Attorney and Health Care Directives (such as a Health Care Proxy or Living Will) are key documents to include as part of your financial and estate planning. 

Still, misconceptions about these documents abound. 

For example, some people I’ve worked with over the years thought they didn’t need a power of attorney because their assets were jointly owned with their spouse or were in a trust. Others believed their spouse would automatically have the authority to make medical decisions on their behalf if they became incapacitated. Neither is true.

In fact, your spouse cannot make decisions about buying or selling jointly-owned property without your signature unless you give him or her the power to do so. Likewise, your spouse’s ability to make decisions about your health or end of life care may be limited if the appropriate documents that include your instructions are not available. 
Here’s what you need to know about the essential documents that you must prepare to make sure your wishes are followed and decisions made on your behalf if you cannot make them.

Powers of Attorney give your “agent” broad or limited control 

A Power of Attorney is a document that an individual (referred to as the “principal”) uses to appoint another person to be his or her “agent” or “attorney-in-fact.” The document gives the agent the authority to act on behalf of the principal using whatever powers the principal chooses. State law dictates who can be an agent, whether more than one agent can be appointed, and what limits there are to the powers an agent can have. 
The amount of “power” or control you give to someone with a Power of Attorney can be broad or limited, depending on the type of document you prepare:

  • A “General” Power of Attorney grants very broad powers to the person you choose as your agent. It means that he or she can take care of all of your financial affairs, such as to buying or selling property, transferring assets, applying for Social Security or other government benefits, and filing tax returns. 
  • ‚ÄčA “Limited” Power of Attorney limits the scope or purpose of your agent. Examples of limited powers are a CPA’s power to sign tax returns or represent you in a tax audit, or to complete a particular transaction on your behalf.
  • A “Durable” Power of Attorney gives your designated agent the ongoing authority to act on your behalf if you are disabled or incapacitated. 

Having a Power of Attorney that is both “durable” and “general” can avoid the need to have a guardian appointed by the court to manage your financial affairs if you are incapacitated. 

What your agent can’t do

It’s also important to recognize that the person you appoint to be your agent or “attorney-in-fact”:

  • cannot act on your behalf after your death,
  • has no authority or control over assets that you have transferred into a trust; and
  • may not have any power to act on your behalf for a closely held business or partnership that you may own (depending on the governing documents of the business or partnership.

Also, because there could be tax consequences for you and your agent if the Power of Attorney is not drafted properly for your particular circumstances, it’s always a good idea to have your Power of Attorney prepared with the help of an experienced estate planning attorney.

Advance Health Care Directives help you control medical decisions

 Because your spouse, child, or other relative does not automatically have the power to make medical decisions on your behalf, the preparation of Advance Health Care Directives (such as a Health Care Proxy or a Living Will), is absolutely essential if you want to stay in control about decisions for your medical care when you’re unable to make them. Here are the details of how those documents work. 


Health Care Proxy

Legally referred to as a “Durable Power of Attorney for Health Care,” a Health Care Proxy allows the person you name as your “agent” to make medical decisions according to your wishes. It becomes effective when one or more doctors determine that you are no longer able to make or communicate health care decisions. At that point, your agent has the authority to make those decisions on your behalf. 
Naming a Health Care Proxy can avoid having a guardian appointed by your state court if you become incapacitated. In Massachusetts and New Hampshire, for example, no one has the power to make medical care decisions on your behalf unless he or she is named as your agent in a Health Care Proxy or is appointed as your guardian by the court.
Although the laws in many states, such as Massachusetts and New Hampshire, allow people to prepare and sign Health Care Proxies without the assistance of an attorney, at Cambridge Trust we recommend consulting an attorney to create these legal documents. That way you can be sure that the correct documents are customized to fit your individual situation. For example, you may want to ensure that your personal and religious preferences are understood and followed by limiting or restricting your agent’s authority. An attorney can help you make sure that your documents reflect this. 

Living Will 

A Living Will is a document that informs others of your general wishes regarding future health care. It is usually used by people who want to express their wishes with respect to the withholding or withdrawal of life-sustaining treatment, such as artificial nutrition and hydration. These instructions apply if you are permanently unconscious (in a persistent vegetative state). 

While many states recognize a Living Will as a binding legal document (In New Hampshire, the living will is recognized by state statute), some states do not. Massachusetts state statutes, for example, do not recognize living wills, although by signing one, a state resident can still provide guidance to his or her agent. 

Who should have these documents?

The answer: Everyone, regardless of age or financial situation.

It’s not unusual for people who are elderly or have substantial assets, to draw up Powers of Attorney and Advance Health Care Directives when they are working on their estate plans. However, it’s also important that all adults, young or old, have these documents in place to make it easier for their loved ones to manage routine transactions or make decisions about serious medical issues on their behalf. Because of the greater risks involved in a youthful lifestyle, such as more travel exposure and the greater possibility of challenging physical activities, advance health care directives are particularly important for younger people. 
A person you trust should be empowered to arrange for the care you prefer just in case you can’t make decisions or communicate them on your own. 


Powers of Attorney and Advance Health Care Directives are key planning documents for your future well-being. So the agent you name for each one should be a responsible person who knows you well and understands your wishes, such as a family member or close friend. It’s also important for your agent to know about the appointment and to agree to serve. 
With these documents in place, your agent can take care of your financial and medical affairs in the event that you become disabled or incapacitated. These documents can even make it possible for your agent to revise your estate plan account for changing circumstances that occur after, or because of, your incapacity. 
This article is for informational purposes only and should not be construed as investment or legal advice.