The ‘simple’ power of attorney may not be so simple

By Benjamin B.

de Forest,

Elder Law Attorney, Canton

The power of attorney -- Seen by many as such a "simple" document they prepare their own using forms available on the Internet. Certainly less important than a person's Last Will and Testament or the Revocable Living Trust. But is that really the case?

What is a power of attorney?

The power of attorney is a legal document by which you (the Principal) name someone other than yourself to handle your financial affairs. Paying bills, transferring funds, investing assets, signing and filing income tax returns, etc. The person you name is called the Attorney in Fact.

With modern medicine the average person is living much longer than before and there is a good chance that at least part or your life you could be living in an incapacitated condition and therefore will not be paying your own bills. You may not have enough assets to make a Revocable Trust and a "trustee" worthwhile to manage your assets.

If you can't manage your affairs, who can? The attorney-in-fact can.

As an attorney, I have seen hundreds of powers of attorney over the years. Many are one-page documents ... that is probably perfectly fine for so-called "simple" banking transactions, to allow someone to pay bills.

But what if, instead of simple banking transactions you enter a skilled care nursing facility and the cost is $6,000 per month.

And let's say your child visits an Elder Law Attorney who suggests that large gifts be made of your assets in order to protect at least some of the family nest egg? If the power of attorney does not specifically state that child can make gifts to protect assets, he or she won't be able to.

The power of attorney we use can be up to 12 pages long simply to delineate every power that might be needed.

And what if you have an old insurance policy worth around $100,000 which is payable to your deceased spouse? Your attorney-in- fact may want to change the beneficiaries to your children because otherwise when you die the insurance company will require your children to open a Probate Estate in order to collect the proceeds since there is no named beneficiary on the policy. If your power of attorney does not specifically give your attorney-in-fact the power to change beneficiaries, the insurance company may refuse.

Even if you need to cash out the policy or assign the ownership in order to try and protect the cash value, if you are in a nursing home, your insurance company may say "no."

Many children will ask me why they can't just get guardianship over Mom or Dad and give away assets that way. Well, the Probate Court provides a very important and necessary service, but once guardianship is established, the chances of doing any planning to protect your property or assets are severely diminished because the court's viewpoint is you should hold on to all your monies, especially if you are going to need them to pay for a nursing home. Also, a guardianship will require court authority for the payment of bills, and an inventory, annual accountings, a bond, and a variety of other legal documents that your child will most likely have to hire a lawyer to prepare.

What is the single most important factor that you need to decide in having a power of attorney prepared for you? It is who you name as the attorney-in-fact. You are giving that person tremendous powers over your assets so you need to trust them. But this power is necessary for your attorney-in-fact to have the ability to do what might be needed someday to protect your assets and manage your affairs in the manner you would want.

You only die once but you can live in a physically and mentally compromised state for years. And if you are not mentally competent to sign a power of attorney when you need it, it's too late.

The moral to the story is that while you are able to make sound judgments about things of this nature seek the advice of a qualified Elder Law Attorney who is conversant in such matters so that you can have a complete and comprehensive power of attorney prepared and discuss other important issues.