Having a broadly drafted power of attorney can enable an agent to act in a representative capacity in a multitude of situations. If authorized, the agent can act to provide for the principal’s personal care, manage the principal’s assets, engage in estate planning, support dependents, make gifts (such as to qualify for Medi-Cal), and more. Let us discuss.
If the principal needs personal care at home, at a hospital, or at a nursing care facility then an authorized agent can sign the personal care contracts and use the principal’s financial resources to pay the expenses. The agent represents the principal’ interests and pays for the health care expenses authorized by the agent under the principal’s advance health care directive. Oftentimes, one and the same person is the agent acting in both capacities.
Managing and using bank and brokerage accounts, including retirement accounts, depends on the financial institution accepting the power of attorney. Often they are reluctant to do so unless the power is on their own form, drafted by their own legal department. Such powers are limited to managing accounts at the one institution only, and are limited in duration. They are necessary supplements to the generally applicable durable power of attorney.
A power of attorney can also be used for estate planning. It can authorize the agent to establish a trust and to transfer the principal’s assets into a trust on behalf of the principal to avoid probate. Avoiding probate is especially important to the family of anyone receiving Medi-Cal where estate recovery only applies if there is a probate.
Moreover, the power can also authorize – or not authorize — an agent to execute death beneficiary forms to name beneficiaries to Pay on Death (POD) bank accounts, Transfer on Death (TOD) brokerage accounts and retirement plans (e.g., IRA’s and 401(k)’s).
If the principal financially supports someone the agent can be authorized to continue such support. This is especially relevant to supporting dependent adult children or parents. For example, continuing to pay a child’s car insurance and a stipend while attending college. Also, for example, to pay utility expenses of a dependent parent.
Nowadays, with digital (online) financial assets, it is important to authorize an agent to access such online accounts in the event that the agent does not know the principal’s log-on user name and password. The same consent language can authorize access to email and social media accounts that become inaccessible.
Express limitations and prohibitions can be included to prevent the misuse of a power of attorney. For example, the document may prohibit an agent from changing death beneficiaries to accounts.
A power of attorney can either become effective immediately upon signing or later upon incapacity of the principal. Powers of attorney terminate, amongst other ways, upon revocation (if the principal has the capacity to revoke) or upon death of the principal.
Without a power of attorney, an expensive, time consuming and aggravating court supervised conservatorship proceeding is often necessary in order to manage an incapacitated person’s legal, financial and property affairs. Conservatorships can be contested, resulting in expensive and time consuming litigation.
The foregoing is a general discussion and is not legal advice. If needing guidance on such issues, consult a qualified attorney.
Dennis A. Fordham, attorney, is a State Bar-Certified Specialist in estate planning, probate and trust law. His office is at 870 S. Main St., Lakeport, Calif. He can be reached at Dennis@DennisFordhamLaw.com and 707-263-3235.