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.  A proper starting point is to emphasize that the
proper use of a power of attorney as an estate planning and elder law
document depends on the reliability and honesty of the appointed agent.

The agent under a power of attorney has traditionally been called an
“attorney-in-fact”or sometimes just “attorney.” However, confusion over
these terms has encouraged the terminology to change so more recent
state statutes tend to use the label “agent” for the person receiving power
by the document.

The “law of agency” governs the agent under a power of attorney. The law
of agency is the body of statutes and common law court decisions built up
over centuries that dictate how and to what degree an agent is authorized
to act on behalf of the “principal”—in other words, the individual who has
appointed the agent to represent him or her. Powers of attorney are a species
of agency-creating document. In most states, powers of attorney can be and
most often are unilateral contracts – that is,signed only by the principal, but
accepted by the agent by the act of performance.

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. Even
though exploitation risks exist, there are great benefits to one individual
(the principal) privately empowering another 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 wealth topics in an “advance health care directive.”

Another important preliminary consideration about powers of attorney is
“durability.” Powers of attorney are voluntary delegations of authority by
the principal to the agent. The principal has not given up his or her own
power to do these same functions but has granted legal authority to the
agent to perform various tasks on the principal’s behalf. All states have
adopted a “durability” statute that allows principals to include in their powers
of attorney a simple declaration that no power ranted by the principal in
this document will become invalid upon the subsequent mental incapacity
of the principal. The result is a “durable power of attorney” – a document
that continues to be valid until a stated termination date or event occurs,
or the principal dies. Absent durability provisions, the power of attorney
terminates upon the principal’s death or incapacity.

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.

Provides the ability to choose who will make decisions for you.
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 or conservatorship may need to be
established, and can be very expensive.

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 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. While not only
a costly process, another detriment is the fact that the incapacitated person
has no input on who will be appointed to serve.

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.

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 allowing, the agent to perform these tasks and more,
precious time and money may be wasted.

Prevents questions 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.

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 the agent’s ability
o 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.

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.

Allows agents to talk to other agencies.
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.

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 conservator to protect assets for others while enhancing
he 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.

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 did not address digital assets, yet more and more
individuals have digital accounts.

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 Everyone Needs a Comprehensive
Power of Attorney could be expanded. 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.
Please call us if we can be of assistance in any way or if you have any questions
about durable powers of attorney.

To comply with the U.S. Treasury regulations, we must inform you that (i) any U.S. federal
tax advice contained in this newsletter was not intended or written to be used, and cannot be
used, by any person for the purpose of avoiding U.S. federal tax penalties that may be imposed
on such person and (ii) each taxpayer should seek advice from their tax advisor based on the
taxpayer’s particular circumstances.