By Lori A. Leu & Erin W. Peirce, Collin LIVING WELL Magazine
Many people understand they need a Will to control the distribution of their assets after they die. However, the most important estate planning document is actually a Durable Power of Attorney.
Imagine that your father is diagnosed with an aggressive form of Alzheimer’s disease and suddenly needs to move to a memory unit in an assisted living facility for his safety. Previously, your father had been very independent and never involved you in his finances. However, you recently noticed overdue bill notices on his counter and stacks of unopened “home shopping” packages. Upon further investigation, you discover your father has a large amount of debt and very little savings. His income is not sufficient to pay the cost of assisted living, he has no long-term care insurance, he is not eligible for Veteran’s benefits, and the care he needs is not covered by Medicaid. The only way to pay for his care is to sell his only asset, his home. The market is favorable, so you have few concerns, until you speak with a title company and learn that your father must have named you as his agent in a Durable Power of Attorney for you to have authority to sell his home. Unfortunately, your father never understood the need for a Durable Power of Attorney, and now it is too late. Your father is legally incapacitated and no longer able to sign legal documents. Without a Durable Power of Attorney, no one is legally authorized to act on behalf of your father – not even his family. The only way you will be able to sell your father’s home, pay his bills, or otherwise manage his finances, is to be appointed the legal guardian of his estate by a judge through a lengthy and costly court process. If only your father had signed a Durable Power of Attorney when he had the ability to do so, he would have saved thousands of dollars in legal fees, and months of heartache and stress.
A Durable or “Financial” Power of Attorney is a legal document by which you designate someone to serve as your agent with the legal authority to act on your behalf in financial affairs, including managing accounts, paying bills, and selling real property, among others things. A Durable Power of Attorney can be effective immediately or it can be “springing,” that is, effective only upon a physician’s written confirmation of disability or incapacity. Alternate agents should be named in case any agent is unable or unwilling to serve, so that you always have someone trustworthy in place to act on your behalf. Everyone, at some time, will need an agent to act on his or her behalf. Your wishes should be placed in writing while you have the ability to do so.
When an agent accepts the authority granted under a Durable Power of Attorney, a “fiduciary” relationship is established between you, as the principal, and your agent. This is a special legal relationship that imposes legal duties on the agent until he or she resigns or ceases to act, or until you revoke the authority or die. Your agent’s fiduciary obligations generally include the duty to (1) act in good faith on your behalf, (2) do nothing beyond the authority granted in the power of attorney, (3) act loyally for your benefit, and (4) avoid conflicts that would impair the agent’s ability to act in your best interest. Your agent is prohibited from asserting ownership or benefiting personally from your assets.
A Durable Power of Attorney is recommended for everyone 18 years of age and older. Because a Durable Power of Attorney conveys broad and strong powers, before appointing a financial agent you should consider who would be worthy of such authority. Often people prefer to appoint spouses, children, or other family members as agents, to keep financial affairs private and avoid hurting feelings. However, appointing a family member may not be the best option for everyone. In all cases, signing a Durable Power of Attorney and appointing an agent should be done only after deep reflection as to the abilities and trustworthiness of each candidate. For a better understanding of the importance of estate planning documents and elder law issues, and to find an elder law attorney in your area, go to www.naela.org.
Lori A. Leu and Erin W. Peirce are Elder Law attorneys with Lori A. Leu & Associates. They help clients sort through Elder Law issues every day and can be reached at 972-996-2540.