Some Thoughts on Financial Powers of Attorney and a Few Words on Long Term Care
Updated: May 20
Speaking in personal voice in this post, I want to offer some thoughts about financial powers of attorney, especially from the point of view of an elder law attorney. I will try to say a word or two about medical powers of attorney in a later post. As usual, the disclaimers: The information I present here includes both facts of law and opinion, but I am not your attorney unless and until you have met with me and have hired me to advise you or do something for you. So please seek legal counsel before going out and doing something to yourself or others based on the words of some loose legal cannon with a blog.
Right up front, I want to say that everyone who has the legal capacity to do so should have a financial power of attorney. It is trite; I get that, but you just never know when you will need someone to help you with your financial affairs. You might have an accident, get sick, find yourself quarantined, or just need the convenience. I recently used my wife's power of attorney to replace the title to a car we owned without dragging her out of her classroom to sign the papers.
Everyone has a reason why he or she has not managed to execute a power of attorney; some reasons carry very little weight and others quite a bit more. But I find that folks who learn some of the very good reasons, even compelling reasons, to have a financial power of attorney become more motivated to "get 'er done," as we say here in Lubbock.
Most people put off basic estate planning (will, financial and medical powers of attorney, HIPAA Release, and Directive to Physicians) for a very human reason - they would prefer do anything else than take care of a chore that likely will cost them money and, real bonus here, make them think about their mortality and/or possible incapacity.
In addition to simple procrastination, the most common objection that I hear is, "I'm not ready to give up control yet." However, executing a power of attorney does not put your agent 'in charge' of anything, least of all you, the principal. Notice even the wording, 'agent' and 'principal,' points to the actual relationship: The agent serves the principal, and indeed, the agent undertakes numerous enforceable fiduciary duties in becoming your agent. Further, the agent serves at the pleasure of the principal who can fire the agent at any time and for any reason or no reason at all.
I rather think that the giving up control argument probably has more to do with not trusting a prospective agent, in which case you probably should not name them.
Besides procrastination and control issues, some people simply do not care to spend the money which can lead to a couple of less than ideal outcomes, either they never do it at all or they google it or find an old form book in the local library and grow their own. Now I will be the first to admit that growing your own can work and give you that warm, satisfied feeling you get when you do something yourself, especially if it keeps some attorney from a fee. But as someone, somewhere once said, "You get what you pay for." That form you filled in may represent the state of the art today... in New Hampshire, or look exactly like the form your great uncle Ira used in 1942 when he joined the merchant marine. Remember that advice and counsel on choosing the proper document and using it the right way makes up a larger portion of the attorney's fee than does the paper that the document is printed on.
Real problems do arise in relation to financial powers of attorney, and as an elder law attorney, I am painfully aware of them. Certainly, dishonest or just unsophisticated agents can cause the principal serious financial loss. An agent can pay bills and take care of property, but that means they usually have access to most if not all of the principal's financial resources and can conduct financial and real property transactions providing the agent with ample opportunity to steal money and other assets or to engage in risky investments. These dangers point to another problem, especially in the elder law context: The principal may not have any surviving family members or friends appropriate to handle the principal's financial affairs.
Nevertheless, if you as an adult, become incapacitated, temporarily or permanently, only an agent or a guardian can handle your financial affairs for you, and guardianships are cumbersome and expensive. At the very least, you may need someone to pay bills and take care of your home.
These issues become especially important if you require long term care, and most critically if you need Medicaid assistance to pay it. To keep you at home longer, an agent may need to contract with care providers and oversee modifications to the home. To pay for assisted living, the agent may have to find and to pay an appropriate facility for you and then lease or sell your home to help finance the care. If you need institutional skilled nursing which can cost between $5,000 and $6,000 (in Lubbock), you may need to apply to Medicaid for assistance requiring your agent to interact with financial institutions including banks, insurance companies, and investment houses. Your agent may need broad authority to make gifts of your property in order to obtain and maintain Medicaid eligibility.
Much more can be said about financial powers of attorney, but there are good and compelling reasons to get 'er done while you can.