The benefits of a highly detailed, comprehensive power of attorney are numerous. Unfortunately, many powers of attorney are more general in nature and can actually cause more problems than they solve, especially for our senior population. This article highlights the benefits of a comprehensive, detailed power of attorney, including some of the specific provisions that should typically be included for older individuals. It will also indicate some of the problem areas where a less detailed or less comprehensive power of attorney can create problems.
Powers of Attorney
A Power of Attorney is a document in which an individual (the “principal”) grants authority to a trusted person (their “agent”) to act on the principal’s behalf. Powers of attorney are especially important in order to protect older individuals, who are often at greater risk of losing the ability to make decisions or care for themselves, and who will eventually need to rely on others to manage their affairs.
A proper starting point is to emphasize that the use of a power of attorney as an estate planning and elder law document depends on the reliability and honesty of the appointed agent. Much has been written about financial exploitation of individuals, particularly seniors and other vulnerable people, by people who take advantage of them through undue influence, hidden transactions, identity theft and the like. Future articles may discuss guardianships and the benefits and disadvantages of court supervision of care of vulnerable people in such contexts. Even though exploitation risks exist, there are great benefits to one individual (the principal) privately empowering another trusted and trustworthy person (the agent) to act on the principal’s behalf to perform certain financial functions.
A comprehensive power of attorney may include a grant of power for the agent to represent and advocate for the principal in regard to health care decisions. Such health care powers are more commonly addressed in a separate “health care power of attorney,” which may be a distinct document or combined with other health topics in an “advance health care directive.”
Another important preliminary consideration about powers of attorney is “durability.” If a power of attorney is “durable,” then the power of attorney remains effective even after the principal loses the capacity to manage their own affairs. If a power of attorney is not “durable,” then the agent’s authority will cease just when it will probably be needed the most – when the principal loses capacity. In Pennsylvania, powers of attorney are presumed durable unless they specifically say otherwise.
Having covered the explanation of what a durable power of attorney is, let us look at the top benefits of having a comprehensive durable power of attorney.
1. Avoids tying the agent’s hands, which could prevent asset protection planning.
A comprehensive power of attorney should include all of the powers required to do effective asset protection planning. In Pennsylvania, if the power of attorney does not include certain specific, explicit powers, it is legally presumed that the agent does not have those powers. Without those specific powers written in the power of attorney, an agent cannot act. Tying the agent’s hands can greatly dampen the agent’s ability to complete planning and could result in thousands (or ten’s or even hundred’s of thousands) of dollars lost. Most powers of attorney, and especially “boilerplate” powers of attorney (which are often written without special consideration for senior planning needs) do not specifically grant these powers.
2. Provides the ability to choose who will make decisions for you (rather than a court).
If someone has signed a power of attorney and later becomes incapacitated and unable to make decisions, the agent named can step into the shoes of the incapacitated person and make important financial decisions. Without a power of attorney, a guardianship may need to be established, which can be very expensive.
3. Avoids the necessity of a guardianship or conservatorship.
Someone who does not have a comprehensive power of attorney at the time they become incapacitated would often have no alternative than to have someone else petition the court to appoint a guardian or conservator. The court will choose who is appointed to manage the financial and/or health affairs of the incapacitated person, and the court will continue to monitor the situation as long as the incapacitated person is alive. The guardianship rules impose strict restrictions on the guardian’s ability to act. Frequently these restrictions even impair the ability of the guardian to protect the incapacitated person’s assets from long term care costs.
4. Provides family members a good opportunity to discuss wishes and desires.
There is much thought and consideration that goes into the creation of a comprehensive power of attorney. One of the most important decisions is who will serve as the agent. When a parent or loved one makes the decision to sign a power of attorney, it is a good opportunity for the parent to discuss wishes and expectations with the family and, in particular, the person named as agent in the power of attorney.
5. The more comprehensive the power of attorney, the better.
As people age, their needs change and their 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 specifically allowing the agent to perform these tasks and more in a power of attorney, precious time and money may be wasted.
6. Prevents questions (and arguments) about principal’s intent.
Many of us have read about court battles over a person’s intent once that person has become incapacitated. A well-drafted power of attorney, along with other health care directives, can eliminate the need for family members to argue or disagree over a loved one’s wishes. Once written down, this document is excellent evidence of their intent and is difficult to dispute.
7. Protects the agent from claims of financial abuse.
Comprehensive powers of attorney often allow the agent to make substantial gifts to self or others in order to carry out asset protection planning objectives. Without the power of attorney authorizing this, the agent (often a family member) could be at risk for financial abuse allegations.
8. Allows agents to talk to others.
An agent under a power of attorney is often in the position of trying to reconcile bank charges, make arrangements for health care, engage professionals for services to be provided to the principal, and much more. Without a comprehensive power of attorney giving authority to the agent, many companies will refuse to disclose any information or provide services to the incapacitated person. This can result in a great deal of frustration on the part of the family, as well as lost time and money.
9. Allows an agent to perform planning and transactions to make the principal eligible for public benefits.
Another reason that a comprehensive durable power of attorney is essential in elder law is that most Judges are not willing to authorize a guardian to protect assets for others while enhancing the incapacitated person’s eligibility for public benefits. However, this type of planning would usually have reflected the wishes of the incapacitated person – wishes that would remain unfulfilled if a comprehensive power of attorney were not in place.
10. Provides immediate access to critical assets.
A well-crafted power of attorney includes provisions that allow the agent to access critical assets, such as the principal’s digital assets or safety deposit box, to continue to pay bills, access funds, etc. in a timely manner. Absent these provisions, court approval will be required before anyone can access these assets. Digital assets are also important because older powers of attorney often do not address digital assets, yet more and more individuals have digital accounts.
11. Provides peace of mind for everyone involved.
Taking the time to sign a power of attorney lessens the burden on family members who would otherwise have to go to court to get authority for performing 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 and loved ones.
This discussion of the Reasons Why Seniors Need a Comprehensive Power of Attorney could be expanded by many more. Which benefits are most important depends on the situation of the principal and their loved ones. This is why a comprehensive power of attorney is so essential: Nobody can predict exactly which powers will be needed in the future. The planning 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.
We are here to help. Elder Law Attorney Daniel Baltuch will be happy to provide you with a complimentary review of your current Power of Attorney to see if it is suitable for your senior planning and asset protection needs. Please call us if we can be of assistance in any way or if you have any questions about durable powers of attorney.