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Senior Citizen's Guide to Cleveland

The Ubiquitous Power of Attorney

The Power of Attorney. The “lowly” document, which for years has been seen by laypersons as less important than its “big brother” the Last Will and Testament or The Revocable Living Trust. But is that really the case?

First 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 legal affairs. The person you name is the Attorney in Fact. The powers that you give the person are usually financial in nature. Paying bills, transferring funds, investing assets, signing and filing income tax returns, etc.

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 one-page documents that are probably perfectly fine for so called “simple” banking transactions, to allow the daughter (the Attorney in Fact) to pay bills and access the checking account. 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 daughter 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 daughter can make gifts it has the potential to be a legal problem and she may in fact not be able to do the practical thing which is to protect you assets. What is that you say? “I will just sign a new Power of Attorney at that time.” Well if you don’t have the “legal capacity” to sign such a legal document because of your dementia, your actions may be questionable as to whether the document is valid at all. Do you really want your child doing things that may be legally questionable? In fact, because your Attorney in Fact is a fiduciary, if he or she tries to gift your assets to your two children, and includes herself as an equal recipient of the gift without the legal power to do so, she could be guilty of a charge of breach of fiduciary duty.

And what if you have an old insurance policy worth around $100,000 which is payable to your deceased husband? You want to change the beneficiaries to your children because if you don’t when you pass away the insurance company will require your children to open a Probate Estate 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 that power the insurance company may balk. Even if you need to cash out the policy or assign the ownership in order try and protect the cash value you are in a nursing home, your insurance company may say no.

What is that you say? “My children can always file a Guardianship over me with the Probate Court and the Court will let them do whatever they want.” Well the Probate Court provides a very important and necessary service but once Legal Guardianship is established you can pretty much forget gifts being made of your property because the Court frowns upon that as it takes the position normally you should hold onto all your monies. 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. All of which are potentially available to the public.

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 some day 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. 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 with such matters and can prepare a proper Power of Attorney and discuss other important issues.

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