| A power of attorney is a legal arrangement where | | | | attorney forms" purchased at an office supply store or |
| one person - the Principal - authorizes another person | | | | downloaded off the Internet. Those "statutory short |
| - the Agent - to "stand in their shoes" and act on their | | | | forms" may be fine to transfer real estate or apply for |
| behalf. The relationship of Principal and Agent has | | | | Medicaid. But, many financial institutions are afraid of |
| been around a very, very long time. The best way that | | | | liability unless the Agent has specific authority to take |
| I've found to explain this with clients is to use a | | | | certain actions for the Principal. |
| hypothetical example. | | | | Let me share with you a couple of examples that |
| Pretend that I'm interested in buying a condo on the | | | | might surprise you. |
| beach in North Carolina. Unfortunately, I'm just too busy | | | | Helen came into my office to talk about applying for |
| to get down there for the closing right now. But, I know | | | | Medicaid for her mother, Eleanor. Eleanor was in a |
| your heading down there for vacation. So I sign a | | | | nursing home under private pay. Eleanor was now |
| power of attorney authorizing you to sign the closing | | | | incapacitated, but Helen had her sign a "statutory short |
| documents for me. The power of attorney will be filed | | | | form durable power of attorney" that she found online |
| in the land record in North Carolina in front of the deed | | | | some time ago. |
| to show you had the authority to sign for me. | | | | Helen knew her mother was nearly out of money and |
| Let's say that while you're on your way, I'm in an | | | | had to make a Medicaid application. When we |
| accident that causes me to be unconscious. At that | | | | submitted the application, the Medicaid eligibility worker |
| point, you can no longer act as my Agent. Because | | | | wanted bank statements going back three years. |
| you are merely "standing in my shoes" doing what I am | | | | Helen went to the bank where her mother had one |
| capable of doing, you can't act for me if I'm not | | | | active account and two accounts that were closed a |
| capable. An ordinary "common law" power of attorney | | | | year ago. |
| is terminated when the Principal becomes | | | | The bank manager told Helen he could give her the |
| incapacitated. | | | | statements for the open account, but her power of |
| Obviously, this makes a power of attorney a poor | | | | attorney did not authorize her to get the statements |
| incapacity planning tool. To create an incapacity | | | | from the closed accounts. We ended up having to go |
| planning tool for people, state legislatures across the | | | | to probate court for a conservatorship over Eleanor to |
| country have enacted laws that allow for what are | | | | access the closed accounts |
| known as a "durable powers of attorney". This is done | | | | Let me give you another example. |
| by allowing you to add these "magic words" to the | | | | John bought a "statutory short form durable power of |
| power of attorney, "this power of attorney shall not | | | | attorney" at Staple's where he named his son, Tom, as |
| lapse upon the subsequent incapacity or disability of | | | | power of attorney. John had an IRA that named his |
| the Principal". | | | | wife, Ann, as the beneficiary when he died. Sadly, Ann |
| Probably the single most important document you | | | | was living in a nursing home incapacitated with |
| could have, a durable power of attorney can provide | | | | Alzheimer's. |
| the security of knowing that in a crisis situation, a family | | | | John had always told Tom that he wanted his IRA to |
| member or a trusted friend will have the legal authority | | | | pass to his five grandchildren if he should die. But, John |
| to carry out your wishes if you can no longer speak or | | | | never changed the beneficiary designation on his IRA. |
| act for yourself. Without a durable power of attorney, | | | | Before he could make the changes, John suffered a |
| if something happens to you that results in your | | | | severe stroke and became incapacitated himself. |
| incapacity or inability to make decisions, your family | | | | Tom contacted the IRA plan administrator about using |
| may face costly and time consuming court | | | | his power of attorney to change the beneficiary |
| proceedings and even ongoing court supervision. | | | | designations. The administrator refused to accept the |
| Who you select as the person to be your durable | | | | power of attorney because Tom did not have specific |
| power of attorney requires careful consideration. The | | | | authority to change IRA beneficiaries. When John later |
| person selected not only has authority to act when | | | | passed away because of medical complications from |
| you become incapacitated, but also immediately upon | | | | his stroke, all of his IRA went to Ann and she lost |
| the execution of the document as well. And, they can | | | | Medicaid because she was over assets. |
| essentially do anything that you could do yourself. | | | | Now you can see what I mean by "it depends". |
| Many people ask if they need a lawyer to draft the | | | | Unfortunately, these situations are not unique. Many |
| durable power of attorney for them. The easy answer | | | | people feel their power of attorney allows their agent |
| is "no". The better answer is "it depends". The most | | | | to do anything and everything. Bottom line: the advice |
| important consideration is the complexity someone's | | | | and counsel of an experienced elder law attorney |
| financial affairs. | | | | should be sought to properly draft a power of |
| Many clients come to my office with "power of | | | | attorney. |