What is a Financial Durable Power of Attorney and are they all the same?
Imagine that someday, you become incapacitated. Maybe you were in an accident or had a stroke, or maybe it’s just many years from now and you’ve fall victim to Alzheimer’s or dementia. Contrary to popular belief, your spouse or child cannot not just manage your assets on your behalf. Instead, they would need to go down to the court house and initial an expensive and time consuming guardianship proceeding, asking the judge to appoint them as your guardian so they can manage your affairs on your behalf. A guardianship proceeding can be avoided by having an properly executed and thorough Durable Financial Power of Attorney in place designating who you would want to manage your affairs in the event that you could not.
A Financial Durable Power of Attorney will allow your agent to use your assets to pay for the day-to-day expenses of you and your family, such as paying the mortgage or rent, utilities, medical bills, and so on. It will also allow your agent to collect, on your behalf, any income which you may be entitled to such as Social Security, disability insurance benefits, or other benefits. The Durable Power of Attorney will also allow your agent o file and pay your taxes, manage your stocks, bonds, retirement accounts and so on.
It ultimately depends on the exact powers and provisions included within the document, but I tell my clients to imagine that a Financial Durable Power of Attorney is a “blank check.” It permits the person you name to step in your shoes and do just about anything on your behalf, but at the same time, does not include specific instructions from you as to how you want them to manage things. This is why some clients instead opt to set up a revocable living trust that includes detailed disability instructions.
On the flip side, an issues that commonly arises in the world of elder law and nursing home planning, is that many people have Financial Durable Power of Attorneys that are not powerful enough! Again, your agent can only do those things that you specifically authorized within the Power of Attorney document.
For example, let’s say that you are in the advanced stages of Alzheimer’s or dementia and your family is no longer capable of providing you with adequate care at home, so they consult with an elder law attorney about their options of paying for nursing home care. Frequently, the plan recommended by the elder law attorney will include the establishment of one or more trusts to help you qualify for financial assistance from Medicaid, veterans benefits or other programs to pay for the cost of the nursing home. Imagine your spouse or child’s frustration when they are told that your power of attorney doesn’t permit them to set up the trust on your behalf! This could be a mistake that costs your family tens or hundreds of thousands of dollars!