We hope the New Year has been good for everyone, thus far. The beginning of a new year is a great time to create a comprehensive estate plan or to have an estate plan “checkup” of your existing estate plan to make sure it is up to date.
I recently met with a prospective client who contacted the firm to discuss creating his legacy plan. After discussing the various planning strategies, the prospective client said he did not see the need for a power of attorney and in the interest of saving money, he did not want one. Luckily, I was able to convince the prospective client that a power of attorney was needed. However, in light of this, I thought it would be a good idea to highlight some of the benefits of a comprehensive, detailed durable power of attorney.
So, what is a durable power of attorney? A Power of Attorney is a document that allows you, the “principal” to give another person, the “attorney-in-fact or agent” the authority to make and implement management and financial decisions on your behalf, even if you later suffer a disability. By signing a durable power of attorney, you have not given up your power to do any of the same functions as your agent, but you have granted legal authority to your agent to perform various tasks on your behalf.
So why does a power of attorney matter? Below are some key benefits of having a comprehensive durable power of attorney.
- It provides the ability to choose who will make decisions for you (rather than a court).
If you have signed a power of attorney and later become incapacitated and unable to make decisions, your agent can step into your shoes and make important financial decisions. Without a power of attorney, a guardianship may need to be established, and can be very expensive. Also, in a guardianship proceeding, you lose the ability to say who will handle your financial and/or health affairs and instead the court decides who will be appointed.
- The more comprehensive the power of attorney, the better.
As you age, your needs change and your power of attorney should reflect that. Seniors have concerns about long term care, applying for government benefits to pay for care, as well as choosing the proper care providers. Without allowing the agent to perform these tasks and more, precious time and money may be wasted. - It prevents delays in asset protection planning.
A comprehensive power of attorney should include all of the powers required to do effective asset protection planning. If the power of attorney does not include a specific power, it can greatly dampen your agent’s ability to complete the planning and could result in thousands of dollars lost. While some powers of attorney seem long, it is necessary to include all of the powers necessary to carry out proper planning. - It allows an agent to perform planning and transactions to make the principal eligible for public benefits.
One could argue that transferring assets from the principal to others in order to make the principal eligible for public benefits — Medicaid and/or non-service-connected Veterans Administration benefits — is not in the best interests of the principal, but rather in the best interests of the transferees. In fact, one reason that a comprehensive durable power of attorney is essential in elder law is that a Judge may not be willing to authorize a guardian to protect assets for others while enhancing the ward/protected person’s eligibility for public benefits. However, that may have been the wish of the incapacitated person and one that would remain unfulfilled if a power of attorney were not in place. - It provides peace of mind for everyone involved.
Taking the time to sign a power of attorney lessens the burden on your family members who would otherwise have to go to court to get authority to perform basic tasks, like writing a check or arranging for home health services. Knowing this has been taken care of in advance is of great comfort to families.
While no one can predict exactly which powers will be needed in the future, the goal is to have a power of attorney in place that empowers a succession of trustworthy agents to do whatever needs to be done in the future. If you or someone you know, would like to have a power of attorney or comprehensive legacy plan created, please call us. We would be happy to work with you.
