Don’t Use An Off-the-Shelf Power of Attorney

A durable Power of Attorney is one of the most important estate planning documents you can have, because it allows you to appoint someone to act for you (your “Agent” or “Attorney-in-fact”) if you become incapacitated. Without a valid Power of Attorney, your loved ones would not have the authority to make decisions for you or manage your finances. It might even be necessary to ask a court to appoint someone as guardian or conservator, which is an expensive and time-consuming process. Moreover, the person appointed might not be the person you would have chosen for yourself.

While there are many “do-it-yourself” Power of Attorney forms available, you should consider having an elder law attorney draft this document for you, because there are many significant issues to consider. One size does not fit all.

The Agent’s Powers

The Power of Attorney sets out your Agent’s powers in detail. These powers are typically limited to buying or selling property, managing a business, paying debts, investing money, engaging in legal proceedings, borrowing money, cashing checks, and collecting debts. However, if you want to ensure that your Agent has the authority to do Medicaid planning on your behalf (because you are not able to do so yourself), then the Power of Attorney should also include the power to make gifts and uncompensated transfers, as well as the power to designate beneficiaries of your insurance policies and retirement plans. Using the gifting power to fund a trust and designating different beneficiaries are two extremely important strategies your Agent might need in order to do effective Medicaid asset protection on your behalf.

In Virginia, if a power is not specifically listed on the Power of Attorney, then the usual interpretation is that the power is not granted. The power to make gifts of your money and property is a vitally important aspect of Medicaid planning. If you want to ensure that your Agent has the widest possible range of powers to do Medicaid planning on your behalf to protect your assets if you must enter a nursing home, then your Power of Attorney must give your Agent the power to make or modify trusts, make gifts, and designate beneficiaries. These advanced powers are almost always lacking in “off-the-shelf” Power of Attorney forms, which is why it is so important to consult an elder law attorney.

Springing or Immediate

The Power of Attorney can take effect immediately or it can become effective only if you become incapacitated or disabled – the latter is called a “springing” Power of Attorney. While a springing Power of Attorney may seem like a good idea, it can cause delays and extra expense because your incapacity must be determined and verified (usually in writing) before your Agent may act. If you wish to sign a springing Power of Attorney, it is very important that the method for determining incapacity be clearly spelled out in the document.

Joint Agents

While it is possible to name more than one person as your Agent, this can lead to confusion. If you wish to name more than one person, the document should clearly specify whether all of your Agents must act together (all of them must sign checks, contracts, and the like) or whether each may act independently. It might make more sense and be less confusing to name a primary Agent, and one or more alternate Agents who may act if your primary Agent is not available.

Executing the Power of Attorney

To be valid and acceptable, your Power of Attorney must also be executed properly. Some states require only a signature, but most require that a Power of Attorney be notarized. Many states require witnesses. It is important to consult with an elder law attorney in your state to ensure your Power of Attorney is executed properly, so that it will be accepted by financial institutions.

Accepting a Power of Attorney

Even if you do everything correctly, some banks and other financial institutions are reluctant to accept a Power of Attorney over a year old. These institutions are afraid of a lawsuit if the Power of Attorney is no longer valid. The Farr Law Firm offers an Estate Plan Protection Program, which encourages you to meet with Mr. Farr for a short “legal check up” each year to assess your entire estate plan and to sign new Powers of Attorney and Advanced Medical Directives, ensuring that your documents remain current.

Print Friendly, PDF & Email
About Evan H Farr, CELA, CAP

Evan H. Farr is a 4-time Best-Selling author in the field of Elder Law and Estate Planning. In addition to being one of approximately 500 Certified Elder Law Attorneys in the Country, Evan is one of approximately 100 members of the Council of Advanced Practitioners of the National Academy of Elder Law Attorneys and is a Charter Member of the Academy of Special Needs Planners.

Leave a comment

Thank you for your upload