Who Will Hold Your POA?
By Deborah Jeanne Sergeant
A power of attorney (POA) is a legal document you give an individual who will then be able to make financial decisions on your behalf. The springing power of attorney becomes effective once the person becomes incapacitated, but proving incapacity can take months. Until then, bills can pile up unpaid. A durable POA can be used without proving incapacity.
While it may seem easy to simply get joint accounts with your spouse and skip naming a power of attorney, retirement accounts and other financial vehicles aren’t joint. Only the person named can take money out until his beneficiary receives the money upon death.
It’s all about trust, according to Randell J. Ogden, senior vice president and financial advisor with Sage Rutty and Company, Inc. in Rochester. Legally, a POA can actually empty your bank accounts.
He advises clients to select a trustworthy relative such as a spouse or adult child. Odgen thinks it’s smart to have the attorney hold the original POA for safety.
“Should someone be incapacitated, the person named can go to the attorney to get the paperwork,” he said. “That prevents someone from being careless.”
While it may seem more sensible to choose the daughter who’s good with finances but of dubious character over the son who’s considerate but terrible at balancing his checkbook, Ogden said that character should trump math skills.
“I can coach them through it,” he said.
Selecting a trustworthy child with an untrustworthy spouse may seem unwise; however, only the person named as POA may access the assets. Still, a very controlling and manipulative spouse could force the POA to abuse the person’s finances.
Bob Friedman, attorney and partner with Friedman & Ranzenhofer, PC, in Rochester, said that the person drafting the POA paperwork can include a provision for a monitor to look over the shoulder of the POA “but most people don’t designate it,” he said.
Trust may be why many don’t.
“If they need a monitor maybe you don’t need them as an agent,” he said.
People may also feel self-conscious about appointing a monitor to someone they’re supposed to trust. Or that the POA will feel the person lacks trust in the POA’s honesty or ability to make financial decisions.
Miles Zatkowsky, attorney and partner at Dutcher & Zatkowsky in Rochester, specializes in elder law. He said that abusing the POA rarely happens, but it does happen.
“We tell people if your loved one has an addictive personality or a specific addiction like gambling or drugs, you may want to re-think that,” Zatkowsky said.
Even a generally honest POA holder may “borrow” money and become unable to repay it, such as to buoy up a failing business or repay money owed to someone else.
“As an older adult, you don’t have time to rebuild that wealth,” he said.
It’s ideal to select a person to hold a POA who’s financially stable as well as honest.
Zatkowsky advises people who don’t have a trustworthy relative to select as POA to hire an agency or attorney to serve as POA. Though they charge a fee, their insurance covers loss if anything goes wrong.
He also advises clients to consider a statutory gift rider. Without it, people naming a POA can give them a maximum of $500 total per year. The statutory gift rider permits the POA to transfer money to himself to hold it should the principal need to financially qualify for long-term care.
“Otherwise, the one person you want to have the money is not allowed to gift it to himself,” Zatkowsky said.
People setting up a POA can choose the amount for the statutory gift rider.
Zatkowsky wants people to seek help from an elder law attorney for setting up a power of attorney to ensure that the paperwork is correct.
“Think of who you’d trust under all circumstances and see an elder law attorney, not a real estate or family lawyer,” he said. “They may not be up on the current law because it’s not their area of specialty. They may see one POA a year, not every day. It’s the same as medical specialists. You want to go to one who’s specialized in what you need done.”
What is a POA
A power of attorney is a legal document that gives someone the authority to sign documents and conduct transactions on another person’s behalf. A person who holds a power of attorney is sometimes called an attorney-in-fact.
Powers of attorney are a common estate planning document: many people sign a financial power of attorney, known as a durable power of attorney, to give a friend or family member the power to conduct financial transactions for them if they become incapacitated. People also commonly sign health care powers of attorney to give someone else the authority to make medical decisions if they are unable to do so.
Powers of attorney have other uses as well. You might give someone power of attorney to act in a particular transaction if you cannot do it yourself, such as signing documents at a real estate closing when you are out of town.
Source: www.legalzoom.com