And don’t know if I should include one in my estate plan.
The modern POA allows a competent individual, the principal, to preselect someone he or she trusts to deal with financial matters, currently and/or if he or she ever becomes incapacitated, hence its durability. The document should be flexible enough to deal with the unexpected, hence it is general in the scope of authority and not limited. The sharp rise in the number of people with Alzheimer’s and other forms of dementia and the need to qualify elderly relatives for Medicaid as a way to cover nursing home care directly corresponds with the dramatic increase in POA use in the 1990’s. If a POA has not been executed then legal proceedings may be necessary to have someone declared incompetent pursuant to several medical opinions. If appropriate, the court then appointments a conservator to handle the ward’s financial affairs. POAs are inexpensive and effective legal tools that avoid costly and emotional conservatorships.
Some articles have been written stating that general financial powers of attorneys are really nothing more than a license to steal. Sadly, in the hands of a dishonest agent an overly broad POA can be abused. To avoid self-dealing of the agent, the client and a knowledgeable attorney need to work together to determine who will make a trustworthy attorney-in-fact and to draft a document that defines the level of authority to be given to the agent and builds in appropriate oversight.
When selecting an agent(s) look for someone you know with a history of sound moral and ethical conduct and who also has a good credit history, which evidences an ability to handle potentially compromising situations and money wisely. Also look for someone with a basic understanding of business matters. The agent may be your spouse or an adult child, but not if they have a history of out of control spending, addiction or financial instability. You should also carefully select the attorney that drafts your POA. Your lawyer should be able to easily answer your questions and explain recent changes in the law. You should look for defined sections in the document that deal with your various assets and clearly addresses your concerns about gifting powers and Medicaid. And you may want a provision that requires regular accountings to you while you are mentally competent, or to another relative or a third party as a check on the agent’s powers to spend.
Like homeowner’s insurance for which you select a deductible and predetermine if you want extra coverage for jewelry and other valuables, when deciding on the provisions for a durable general power of attorney you first have to make sound decisions about who will serve as agent and what authority the attorney-in-fact actually needs. Home owners insurance is a good thing and in the right hands a well drafted durable general power of attorney is an invaluable planning tool that can give you peace of mind and save you and your family thousands of dollars. A poorly drafted document in the wrong hands can be problematic, lead to litigation and allow your hard earned assets to be wasted.