Power of Attorney: The Broader, The Better By: Jessica L. Whaley, Esq.
When speaking about estate planning in general terms, most people tend to direct their attention to those documents that plan for after they have departed this life (i.e. a will or trust). However, when we prepare an estate plan for our clients, we not only want to prepare documents to assist in the administration of their estate, but also to aid in the years of life ahead. This is where a Power of Attorney (“POA”) becomes a useful document - when it is drafted correctly. As we will discuss below, without the proper powers assigned within the document, a POA can be a source of grief for those attempting to help rather than the powerful document it is intended to be.
In basic terms, a POA is a document which grants authority for an agent to act on behalf of the principal in regard to legal and financial matters. In 2010, our states passed the Power of Attorney Act stating that each principal must grant both General and Specific Authority within the POA, which includes agent powers such as the ability to make gifts or create irrevocable trusts. Given the change in law, we recommend that anyone with a POA pre-dating 2010 have a new document created. Further, we also recommend that our clients grant their agent the broadest authority possible in order to empower their trusted decision makers to act however is necessary.
Our recommendation for broad authority stems not only from our desire to protect our clients during all seasons of life, but also, unfortunately, from seeing the effects of a POA that fails to do this. Issues with a POA that limits the agent’s authority most often arise when a family has asked for our assistance in protecting assets from the costs of long-term care. In this case, a family may come to us under the impression that the POA in effect is sufficient to complete the necessary planning. Imagine the frustration they feel when we inform them that the planning is not possible with the current POA since it fails to provide the powers needed or requires that the principal be incapacitated. It is this frustration that drives our push for education of not only our colleagues in the legal field, but also the community as a whole.
You may be left asking what we do when a client comes to us with a defunct POA. First, we ask whether the principal has the ability to sign a new POA that is all inclusive. If they have capacity, then we have them execute a new and thorough POA and the problem is solved. However, when a principal is incapacitated and a new POA cannot be signed, we then are left to petition the Court for guardianship, which can be a time-consuming and expensive process. Further, the Court often requires that we file two petitions when we are helping a family protect assets from the costs of long-term care: one to create the guardianship and a second petition to approve whatever planning the family wishes to do. Unfortunately, with the time it takes to create a guardianship and the cost of nursing home care ($12,000+ per month), we are sometimes unable to proceed at all because, as a result of the delay, the assets the family was trying to protect have been eaten up paying for care while waiting.
While our hope for each client is that they never need to use a POA for failing health or incapacity, the reality is that many do come to need the broad agent powers we include in our POAs. As you can see, when it comes to a Power of Attorney document, the broader the authority, the better it is for long-term use. What is important is naming the best person(s) for the job!
Try to resist the urge to download forms off the internet. Hire an experienced elder law attorney to create an estate plan that will actually work when you need it to (upon your incapacity and/or death).