By Aric D. Burch
April 3, 2017
When you hear the words “estate planning,” what do you think? The most common answers I hear mention “wills” or “trusts.” Although estate planning includes those documents, which carry out your plan after death, it also includes documents to help carry out your wishes while you are living. These documents are called powers of attorney, and every estate plan should have a Power of Attorney for Health Care and a Durable Power of Attorney for Finances. This article focuses on the Durable Power of Attorney for Finances.
The Durable Power of Attorney for Finances allows you to name someone to make your financial decisions when you are no longer able to do so (the “Agent”). It is “durable,” meaning it remains effective even if you become incapacitated after signing the document. The Durable Power of Attorney for Finances can either be effective immediately upon signing or only become effective under certain circumstances (typically when the Power of Attorney for Health Care is activated). The Durable Power of Attorney for Finances contains numerous provisions related to various financial actions, such as provisions related to investments, real estate, taxes, beneficiary designations, and gifting.
Careful thought must be given to using a standard Durable Power of Attorney for Finances form found online. These forms, although valid if executed properly, usually have very broad, general powers. These general powers may not allow your Agent to do the things necessary to fully care for you or carry out your overall estate plan.
For example, if you have concerns about paying for long-term care (e.g., nursing home), your Durable Power of Attorney for Finances must contain provisions allowing your Agent to apply for Medicaid, create trusts if necessary, enter into contracts for your care, and allow large gifts to be made. These provisions are rarely found in standard forms.
In dealing with gifts, a standard form does not contain adequate provisions. If you want your Agent to be able to make gifts, you must consider placing restrictions on your Agent to protect you from their making large gifts. However, to plan for long-term care, your agent may need to make large gifts as part of that planning process. A standard form will not provide the flexibility to protect you from large gifts and allow for adequate long-term care planning. Reconciling the need for limitations on gifting and an Agent’s need to make large gifts to plan for your care is something you should discuss with an attorney who has experience with these types of issues.
Do not wait to create your Durable Power of Attorney for Finances. This often overlooked document is necessary to avoid an expensive guardianship proceeding, should you be unable to make financial decisions for yourself. It is a document that is vital to ensure your estate plan, once in place, will be carried out both during your lifetime and upon your death.
This document provides information of a general nature regarding legislative or other legal developments, and is based on the state of the law at the time of the original publication of this article. None of the information contained herein is intended as legal advice or opinion relative to specific matters, facts, situations, or issues, and additional facts and information or future developments may affect the subjects addressed. You should not act upon the information in this document without discussing your specific situation with legal counsel.
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