Powers of Attorney

By Martin Shenkman, Jonathan Blattmachr and Esq.

Powers of attorney are one of the most important legal documents you will ever sign. Every adult should have a power of attorney. Yet, many people ignored this fundamental legal step and might have no protection if they are ever disabled or are unavailable for travel or other reasons to act for themselves. They might subject themselves to the costs and trauma of a guardianship proceeding. Many who make the effort to obtain and sign a power of attorney rely on standard boilerplate documents that might not address vital personal, tax, or legal issues that are critical to protecting themselves and their loved ones. Finally, this common legal document is often used as a spigot for elder financial abuse.

This practical yet sophisticated primer is designed to educate and inform you about what a power of attorney is, how you can be certain you obtain a document that works for you, and many other practical steps. Whether you hire an estate planning specialist, a general practice lawyer, use a form supplied by your bank, or prepare a document on your own using one of the many legal websites, you will get a much better result if you read this book and understand the decisions involved.

Once you have a power of attorney document, what do you do with it?

How can you organize your financial and legal matters so that if you are ever disabled your agent can really help you?

If you are named an agent what steps should you take?

Would your religious beliefs or health challenges affect what you might need to do?

This book will give you lots of practical advice that many professional advisers and legal websites often ignore. It will help you really protect yourself and accomplish your goals.

• Language: English
• Publisher: eBookIt.com
• Release date: Apr 26, 2016
• ISBN: 9781942526926

Book preview

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CHAPTER ONE

Introduction

Estate planning is part of financial planning that primarily involves taking steps today to address the possible risks and costs that may occur in the future that could undermine your financial, personal, or legal security. Consider:

• You head off on your dream cruise around the world—12,966,000 Americans are estimated to have taken cruises in 2014. The day you depart your bank erroneously bounces a check you deposited to cover expenses while you were gone. Who can deal with the problems that result while you are pondering the rolling waves and blue sky?

• Maybe you don’t like water, but you’ve always wanted to hike the Appalachian Trail. The day after you retire, you leave for Springer Mountain. The next day an IRS audit notice arrives at your empty condo. In 2011, there were 1,564,690 audits. Wouldn’t it be better if someone had the authority to intercede on your behalf rather than have the IRS assume you don’t intend to respond and begin collection proceedings?

• What happens if you become sick or disabled? About 5.2 million Americans are living with Alzheimer’s disease. If you are one of those affected, who will be able to handle your financial matters as you become less able to do so?

• Every year about 720,000 Americans suffer a heart attack. If you’re one of the unfortunate people who has such a medical emergency and are hospitalized for a period of time, who will pay your bills so that your bank doesn’t foreclose on your mortgage, so that the utility company doesn’t cut off your electricity and gas?     

Reality Check:   Disability doesn’t happen to you, it happens to the other guy, so you don’t have to plan. Right? Or perhaps disability is something that happens to sick folks and you’re tougher than a bulldog. Or maybe disability is for old people and you’re still a spring chicken.

Maybe it is time for a reality check:

• In 2012, there were 51,892,000 people over 18 who experienced a disability. That’s about 22.4 percent of the total people over 18, or nearly a 1 in 4 possibility.

• Just over 25 percent of today’s 20-year-olds will become disabled before they retire.

• Over 37 million Americans are classified as disabled, which is about 12 percent of the total population. More than 50 percent of those disabled Americans are in their working years, from 18-64.

What you need is a power of attorney.

Tip: The power of attorney is one of the most important legal and financial documents in your self-protection plan.

Healthcare Decision Making

This book does not address appointing a person (called an agent or proxy) to make healthcare decisions for you, or any of the other means you can use to communicate or address medical decision making. These issues are addressed in other legal documents such as in a healthcare proxy (sometimes called a medical power of attorney), living will, HIPAA release, and organ donor card.

Bottom Line Up Front

What we will do is guide you through many of the ways you can tailor this powerful tool—your power of attorney—to preserve your control over your finances, maintain your independence, minimize or avoid legal costs and entanglements, and deal with many unexpected what-if scenarios in practical ways. The checklist in Appendix A will help you gather the information and make the key decisions you need to create a power of attorney tailored for you and your personal situation, rather than relying on a standard boilerplate form that most likely overlooks key issues essential to your security.

What Is a Power of Attorney?

The power of attorney is a legal document that grants a designated person (your attorney-in-fact or agent) the power to act on your behalf. It is one of the most important financial and estate planning documents you can have.

Most people think only about a will when they think about estate planning, but a power of attorney can potentially authorize the transfer of more of your wealth than your will can.

A power of attorney is one of the most misunderstood documents. This book introduces a wide range of issues that you might wish to address in your power of attorney, and a number of ancillary planning steps to make the use of your power of attorney more practical. Once you see how important this document is, you will make sure that a power of attorney receives the respect it deserves in your estate and in your financial planning.

The power of attorney is a contract in which you (the grantor or principal) delegate (grant) another person (your attorney-in-fact or agent) the power and right to act on all financial matters on your behalf in the event that you are ill, injured, or unavailable. Although the agent may be called an attorney-in-fact, that individual does not have to be a lawyer. Unfortunately, this is just another incidence of confusing legal jargon.

Although the power of attorney can be a very simple document—even a one-page form—purchased at a local stationery store, or from an online Internet provider, this can be a costly mistake. The power of attorney should be a far more deliberate document designed to address your personal needs now and in the future. An overly simplistic power of attorney may prove inadequate and result in requiring more complex, and far more costly, legal proceedings to accomplish your goals. Thus, a more complex and lengthy document prepared by an attorney to deal with specific issues you might face, such as dealing with business transactions, real estate exchanges, a professional practice, gifts, and other issues, may prove simpler in the long run.

Tip: When you finish reading this brief book, you will understand why you’ll be better served with a more deliberate, planned, and tailored power of attorney.

This book will help you understand the terminology of a power of attorney, some of the key decisions you might need to make to guide your lawyer in properly preparing a power of attorney for you, and several of the many options that should be considered. We’ll explain how your power of attorney relates to your other estate planning and documents. Finally, you will get some practical suggestions on how to address your financial and legal affairs to maximize the benefits of your power of attorney. Merely securing an adequate (or even good) legal document alone will not suffice. After you read this book, you’ll understand why, and you’ll know what to do to prepare the power of attorney you need.

The Bigger Picture

Think you are too young or too healthy to need a power of attorney? Think again! According to a recent study, only 24 percent of workers have a backup plan for retirement income if forced into retirement sooner than expected. For most people, more planning is critical. A power of attorney is merely one component of what should be a comprehensive plan to address the challenges of illness, disability, and aging. For example, if you don’t have an adequate disability income replacement policy, you might have a great power of attorney document, but if your agent does not have adequate financial resources to work with, they will never really be able to help you and your loved ones in the manner you had hoped for. Comprehensive planning, not just a document, is always best.

CHAPTER TWO

The Process of Obtaining a Power of Attorney

Let’s get started by reviewing the process you should follow to obtain your power of attorney. Read this brief book to better understand the importance of a power, how it can be used, and some of the tailoring you might need to do to address your situation. Make notes as to specific issues or concerns on special items that should be addressed in your power of attorney. You are ready to get started:

• Gather the information necessary for the preparation of a power of attorney. As this book discusses, you need to take a broader view of your overall planning so that you can ascertain not only what provisions to include in your power of attorney, but what other planning steps are necessary to fully accomplish your goals. Appendix A includes a checklist you can complete to prepare some of this information. But bear in mind that any checklist or form is only a starting point. The key, and perhaps what might be referred to as the art of planning, is tailoring the standard steps to meet your personal needs.

• The laws governing powers of attorney vary considerably from one state to another. So hire an attorney in your state to prepare your power of attorney document. Although the discussions in this book will give you many ideas as to how to personalize forms you might find elsewhere, optimally tailoring such a powerful and complex document to your needs and specifications is unlikely to be done well without the help of an attorney. Using an inexpensive Internet form is enticing to many people but there are problems in trying to design your own power of attorney just as there are problems in writing your own will. The next chapter critiques that process. Read this chapter first so you understand more of what is involved in properly planning for a power of attorney so you can fully evaluate what you should, and should not, do on your own.

• Review the draft power of attorney with your lawyer and be sure that it is tailored to address your personal circumstances and goals. This might include your financial status, health (see Appendix B), religious considerations (see Appendix C), or other matters you or your attorney identify. Ask your attorney to provide you an overview so you understand the document in broad strokes. A 15 to 20 minute run-through will make your later more detailed reading of the document much easier and less frustrating. In addition to the general overview, have your attorney identify the key provisions tailored to your specific situation.

• Sign the power of attorney with appropriate formalities (e.g., witnesses and notary).

• Secure the original in a fireproof and safe location. A bank safe deposit box is not likely to be optimal because the days and hours of access may be limited. More important, your agent will need the power of attorney you put in the safe deposit box to prove to your bank that he or she has the right to access the box.

• Determine how many originals should be signed. Many lawyers recommend that multiple copies be signed. Sometimes a third