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Revise Your Powers of Attorney Before Long-Term Care
Anthony B. Ferraro
69-70% of people in the United States are expected to require assistance with some type of long-term care.
Do you have powers of attorney in place?
I know it sounds simplistic, and we have all heard this before, but perhaps the most important document that you can have before needing long-term care is the power of attorney.
Why is the power of attorney so important?
A power of attorney is a legal document where one person called the “principal” authorizes another person called the “agent” to act on their behalf regarding either financial or health related decisions.
Without these powers of attorney in place, no one may have the legal authority to act on another’s behalf and therefore a guardianship proceeding may become necessary. A guardianship proceeding is conducted in court and establishes a legal relationship where a person(s) is appointed by the court (usually a family member) as the guardian of the person that will have the power to make health decisions for another; usually called the Ward. The same person may also be appointed by the court as the guardian of the estate and can then make financial decisions and handle the financial assets of the Ward.
Guardianships can be expensive. They require the opinion of a physician and the appointment of a Guardian ad litem. Guardian ad litem is a court-appointed attorney who acts as the eyes and ears of the judge. Guardianships also require many process formalities and judge’s orders. These matters are strictly observed to ensure that the Ward is protected. This is all well and good, and we are all fortunate to have a legal system that can help serve those that are disabled and may not have had the opportunity to put in place powers of attorney. However, you may avoid this entire process by having a valid power of attorney for property and finance matters and/or a valid power of attorney for healthcare matters. Not only would that process be avoided but all affairs pertaining to your person and your estate can be streamlined while you may be temporarily sick, disabled, or if you need long-term care.
How many different types of powers of attorney are there?
In Illinois we have two types of powers of attorney: one for health and one for property and financial matters.
Sometimes these documents are called statutory powers of attorney and at other times these documents are called durable powers of attorney. The difference lies in the type of form selected to draft the power of attorney and the content of the document. Most of the time we recommend you stick to the Illinois Statutory Short Form Powers of Attorney (one for health and a separate one for property) because these are the type of forms that doctors, other health providers, banks and financial institutions most readily recognize.
Can I create my own powers of attorney?
Yes, you can.
However, they may not contain the necessary language that Elder law attorneys put into such documents such as: the power to make specific types of gifts to family members. This is necessary for tax minimization or for seeking asset tested government benefits like Medicaid. Other important language may deal with the power to remove and add assets to trusts, the power to apply for public benefits and the power to appeal any decision on public benefits. Standard power of attorney forms generally do not have these provisions built into them. By not having this language in place, many are missing out on benefits and protection.
How old should you be when you start executing powers of attorney?
Upon becoming 18 years of age.
Most people do not realize that once a child has reached age 18, no one, including parents, can make either financial or medical decisions for their children without legal documents, such as powers of attorney, authorizing this decision-making power.
Thus ask your children to get powers of attorney in place immediately upon turning 18 years of age.
Are their risks with Powers of Attorneys?
Yes.
However, many practitioners believe that having powers of attorney in place, with the appropriate safeguards, is less risky than not having powers of attorney at all.
So, what are the risks and the appropriate safeguards?
Since a power of attorney for property and financial matters authorizes your agent to be able to make disbursements of money on your behalf, this power, like any power, can be abused.
To prevent, or at least minimize the risk of a rogue agent from abusing their power, it may be useful to put restrictions in the powers of attorney for property and financial matters, including but not limited to, the following, as examples:
- the agent could be required under the terms of the power of attorney document to provide monthly statements from all asset custodians to an independent third-party, selected by the principal who has the right to request the delivery of these monthly statements and will do an independent reading and review to determine whether the expenditures by the agent are solely for and in the best interests of the principal
- the agent could be precluded under the terms of the power of attorney document from creating joint tenancy accounts between the principal, the agent himself or herself, and/or the principal and any third party.
- consider appointing or at least delegating to (on a contractual outsourced basis), reputable, corporate health professionals such as care managers who often will act as power of attorney for healthcare in some situations, and some will also act as agent under power of attorney for property and financial matters. Inquire as to whether they are bonded and insured. This is good option where there may be NO friends or family who are trustworthy, sufficiently experienced, able or willing to act.
These are just examples of some of the precautions that can be taken so that a good power of attorney is put in place and steps are taken to make sure that any possible abuse by a rogue agent is minimized.
What’s the takeaway?
You could wait until later when you need them, however if you develop diminished capacity and lose the cognitive ability to execute documents legally and ethically, then you may never be able to have these types of documents in place and the only alternative may be for someone to pursue, on your behalf, an expensive and complicated guardianship proceeding in court.
Make sure your powers of attorney are in place now.
Anthony B. Ferraro
BS – MS Tax – CPA – JD
An Elder Law, Estate & Trust and Asset Protection Lawyer
The Laws of Aging for Seniors and Boomers
Partner
DiMonte & Lizak, LLC
216 Higgins Road
Park Ridge, IL 60068
847- 698-9600
Websites:
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This document is for discussion purposes only and is not intended to be, nor should it be, considered as legal advice. You should never attempt Medicaid planning, Estate Planning, Probate or Trust Administration without the advice of competent legal COUNSEL.