If you’re reading this blog, then you’ve probably already done a bit of homework regarding estate planning and may have already read that a durable power of attorney is an important part of a comprehensive estate plan. What you may not realize, however, is that there is a spectrum as to how complete and thorough the power of attorney can be.
Powers of attorney can range in scope from those that are “limited” to a specific task or set of tasks such as authorizing an agent to complete a real estate transaction on your behalf, to more broad powers that are intended to be ‘comprehensive.’
When it comes to estate planning, we’re typically talking about those ‘comprehensive’ powers of attorney. However, there is still a broad spectrum of quality and comprehensiveness. For example, the North Carolina General Statutes include a “Short Form Power of Attorney.” Occasionally, I’ll have someone come in for a consultation that has one of these Short Form Powers of Attorney and thinks that they’re protected. While it’s a start, unfortunately, I cringe a little when I see them, because I think this document often gives people a false sense of security.
First, one of the major motivations for executing a durable power of attorney is to ensure that your family doesn’t have to deal with an expensive and time consuming guardianship proceeding on your behalf if you should ever become incapacitated. However, the statutory Short Form Power of Attorney leaves out many key provisions that may be needed by your family and it does not waive the ‘reporting requirement.’ What this means, is that if your family actually has to use the power of attorney, they’ll still have to go through a time-consuming and aggravating process of filing it with the clerk of court and filing regular accountings to the court system.
But even durable powers of attorney drafted by well-intentioned lawyers sometimes lack key provisions. For example, one of the services that we provide is Medicaid and Nursing Home Planning. Frequently, it will actually be the child of an aging parent that will seek our guidance. In such instances, we then have to review the parent’s power of attorney to see what it authorizes. Many powers of attorney do not provide the authority to create a trust, do asset protection planning r Medicaid planning or convey assets for planning purposes. This can really limit our planning options. The end result is that we might miss out on being able to save that family thousands of dollars.
A properly drafted durable power of attorney should be clearly drafted with thorough instructions so as to avoid family disputes but also provide the flexibility your family may need. Don’t wait until a crisis for your family to discover the pitfalls in your current documents. Call our office at (919)443-3035 and ask about our Upcoming Workshops.