The Importance of Durable Powers of Attorney
Clients frequently ask why Powers of Attorney are necessary for married couples. It is a common misconception that your spouse will be able to handle everything on your behalf, should you become incapacitated. This is simply not the case.
First, let me define a Power of Attorney. A Power of Attorney is a legal document that appoints an “Agent” to represent you and handle specific issues for you. Depending upon the terms of the Power of Attorney, your Agent could be authorized to make financial and health care decisions on your behalf.
There are several areas that can create costly problems if you do not have a Durable Power of Attorney in place designating an Agent to act on your behalf during any period of incapacity.
One area involves your real property. If you and your spouse own property jointly, your spouse will not be able to sell or transfer the property. Someone would have to petition the court to be appointed as your legal guardian in order to transfer any real property, including your home. The same would apply to any stocks or bonds which you hold jointly.
In addition, the lack of a Power of Attorney can be a significant problem with regard to retirement benefits. If you become incapacitated, your spouse would not be able to request, change, or stop distributions from any Individual Retirement Accounts or employment retirement accounts. Again, a court order appointing a legal guardian would be required.
Estate and asset protection planning is another important issue that needs to be addressed in the Power of Attorney. Should you ever need long term care, if you want your Agent to be able to protect assets for your benefit, your spouse’s benefit or your children’s benefit, the ability to do so must be included in the Power of Attorney. Without this specific authority, the ability to protect assets will be significantly limited.
Another area where lack of a Power of Attorney can create problems is in healthcare decision making. If you do not have someone designated to make healthcare decisions on your behalf during any period of incapacity, it can be a significant problem. Healthcare providers require an authorized decision maker to make the final decisions on care. Under the new Health Insurance Portability and Accountability Act (HIPAA), health care providers can only talk with and release information to authorized representatives. Again, a Durable Power of Attorney should be in place to deal with these situations. As with the other problem areas your family could end up in court seeking a guardianship order to access information and allow someone to make healthcare decisions for you.
On average, guardianship proceedings take two to three months and can be quite costly in that they involve court filing fees, attorney fees, physician’s fees, and court reporter fees.
These are just some of the problems that can arise. The solution to these problems is to have a Durable Power of Attorney signed while you still have the capacity to do so. A Durable Power of Attorney is a document that is recommended for everyone 18 years of age or older.
A well-drafted Power of Attorney will give your Agent the authority to act on your behalf and to protect your physical well being as well as the financial well being of you and your family.
There are many important issues that should be discussed with your lawyer before you sign a Power of Attorney, such as who will act as your agent and his/her responsibilities and liabilities.
If your document isn’t appropriate or does not cover your needs, the alternative is for your loved ones to obtain a guardianship. A guardianship proceeding results in the Court appointing someone or some entity (i.e. a bank) to handle all your affairs. It is an expensive process with significant limitations. If a guardianship is necessary, instead of you choosing who will act for you, the Court decides. Make sure your specific needs are discussed with your attorney, otherwise your legal documents may not be protecting your wishes in the future.