One of the questions we hear most often is “Do I really need a Power of Attorney?” Most people assume that a Power of Attorney is only needed for the very sick, elderly, or wealthy, and not for the young.
The simple answer is “Yes!” In fact, everyone who is over the age of eighteen (18) should have a Durable Power of Attorney in place.
What is a Durable Power of Attorney?
There are a few different types of Power of Attorney documents. We normally recommend that our clients use the Durable Power of Attorney, because it remains in effect even if you become mentally incompetent.
The Durable Power of Attorney is a legal document that allows you (“the principal”) to appoint an agent or multiple co-agents, as well as backup agents, to have the legal power to act and make property, financial, or other legal decisions on your behalf. In other words, you are appointing someone to help you with your affairs.
Keep in mind that a validly executed Durable Power of Attorney can be used by the agent at any time, whether it be for necessity due to a debilitating illness (such as Alzheimer’s or Dementia) or injury, or for the mere convenience of the principal.
The Durable Power of Attorney is valid for the rest of your life unless you decide to change it. You are able to revoke or sign a new Power of Attorney at any time, as long as you are mentally competent.
A Power of Attorney does not grant your agent the authority to make health care decisions. This would be taken care of with a Health Care Proxy.
Why do I need a Durable Power of Attorney?
The risk of not having a valid Durable Power of Attorney in place is that your family or close loved ones will have no legal authority to quickly help you in an emergency or crisis situation. They will end up spending thousands of dollars, as well as months of their time, involved in a court guardianship proceeding, just to obtain the power to help you.
Let’s look at an example:
John is fifty-seven years old and has been married to Mary for thirty-five years. John manages all of the household finances and business and holds all of the couple’s assets solely in his name. John has no estate planning documents in place because he is quite young and assumed that if anything happened, his wife would have automatic authority to help him and handle their affairs.
John has just suffered a debilitating stroke and remains in a coma after five weeks. Mary has no legal authority to access any of the money that is in John’s name alone and cannot pay any of the monthly household bills. In addition to the worry and angst over her husband’s critical condition, Mary also has to worry about finances and legal matters.
What are Mary’s options?
Unfortunately, in this scenario, even as a spouse of thirty-five years, Mary would have very little choice but to contact an attorney to commence a Guardianship proceeding. Guardianship proceedings can be very costly, as a number of attorneys will be involved. Guardianships can be time-consuming and stressful for the family, as multiple court appearances are commonly required. Furthermore, depending on the family situation, they could even end up in litigation, fighting over who should be the guardian. Even the closest of loving families are not immune to these risks.
Lastly, it is important to be aware that a court-appointed Guardian must file annual accountings with the Court for as long as the Guardianship is in place. This must be approved by a Court Examiner that is paid for their services. Furthermore, the Guardian must file a new proceeding to be discharged once appropriate or when their ward has passed away. In other words, Guardianship proceedings require continued expenses and court oversight and involvement for many years to come.
All of this can be avoided by taking advance steps to sign a valid Durable Power of Attorney.
What kind of powers will my Power of Attorney agent have?
While you can list and limit specific powers within the Power of Attorney, we normally recommend our clients grant full authority to their agents. You never know what the future may hold, so granting your agent full power may ultimately benefit you in ways you never contemplated many years down the road.
Some examples of the powers that you can grant to your agent include the power to:
- Handle your banking and pay your bills
- Buy or sell real estate
- File your income tax returns
- Deal with insurance policies and claims
- Commence litigation if you are injured
- Manage retirement accounts
- Arrange for admission to a facility for rehabilitation
- Move money around to protect it from a nursing home or for tax planning
Who should I appoint as my Power of Attorney?
You should only appoint agents that you fully trust, as you will be granting them a great deal of power. More often than not, people choose to appoint their spouse, adult children, siblings or other close family and even friends.
If you have any questions about the above material or wish to speak to an attorney, please contact Pfalzgraf, Beinhauer & Menzies, LLP at (716) 204-1055. We would be happy to schedule a consultation.