What is a Power of Attorney
A Power of Attorney is a written document in which you give another person (called your “agent” or your “attorney in fact” or just your “POA”) the authority to act for you in accordance with the conditions you specify in the document. In the event you ever become incapable of making financial or medical decisions for yourself, a power of attorney can ensure that people of your choosing will be able to act for you to make decisions that are consistent with your wishes and values.
A power of attorney is a very serious document. It may become one of the most important documents you sign during your entire life. Your power of attorney is so important that you should not rely on a simple or standard document. It should be carefully crafted by your lawyer to meet your individual situation, preferences and goals.
The person you designate as your agent will only be able to act in ways that are authorized in the document. For example, if you want a family member to have access to your medical information in the event of a health care crisis, your power of attorney should grant that authority. Or, if one of your goals is to protect your spouse’s financial security in the event you are in an expensive nursing home, your document should specifically authorize your family to do financial protection planning. The absence of such language can seriously jeopardize the financial security of your family in the event of your long term illness.
Capacity to Execute a Power of Attorney
For a power of attorney to be valid, the person signing it must have adequate intellectual capacity. A power of attorney is not valid unless you knew what you were doing and understood that the document authorized someone else to make decisions for you. In Pennsylvania, every adult is initially presumed to be competent, and a diagnosis of Alzheimer’s or other dementia does not necessarily mean that it is too late to sign a power of attorney.
Critical Issues to Consider BEFORE you sign a Power of Attorney
Here are some critical issues to consider before you sign your power of attorney.
1. Asset Protection. Nursing home costs in Pennsylvania are over $ 9,000 per month. Do you want to authorize your agent to protect your assets from those costs? If so, your agent may need to transfer ownership of your assets to your spouse or children. This authority must be very clearly set out in the document, or your agent will not be able to protect your assets for your family. A standard form power of attorney normally doesn’t include this power, nor do documents you purchase online. Even some lawyers may be unaware of the importance of including this authorization, so you may need to raise this issue yourself. You may want to consult with a specialist, a Certified Elder Law Attorney, if you want to authorize this kind of planning.
Authorizing someone to transfer your assets can raise a number of troublesome issues. Who should be the recipients? Just your wife or husband? Your children? Should you require that your children be treated equally when assets are transferred? What restrictions should be placed upon the agent? Should the agent be authorized to make transfers to himself or herself? And so on. Discuss these issues carefully with your lawyer, before you sign.
2. Authorization as your health care agent. A power of attorney can help to ensure that you will never receive undesired medical treatments, that your pain will be limited, and that you will always be treated with dignity and respect. To achieve these goals, your document should express your health related values and philosophy, at least in general terms, and empower a trusted agent to serve as health care advocate for you.
And in addition to covering these health issues in your power of attorney, you should discuss them with your agent and other loved ones. No document can anticipate the exact health circumstances that will arise in your future. Your family may have to make difficult decisions in complex and ambiguous circumstances. Help them by talking with them now about your philosophy of life and death. The most effective planning will involve conversation about your values and wishes, followed by more conservation.
There are a number of so-called advance health care directives you can use to try to exercise some control over the medical treatment you will receive when you are not competent to speak for yourself. These include living wills, powers of attorney, and do-not-resuscitate orders.
In general, I tend to discourage my clients from signing living wills because that form of health care directive has significant limitations. For example, a living will is effective only if you are in a terminal condition or permanently unconscious. It is not relevant to questions about day-to-day care, placement or treatment options that may need to be made for you if you ever lacking capacity.
The health care power of attorney is a better directive for most people. The power of attorney will allow your agent to make all kinds of health and personal care decisions for you whenever you are incapacitated. You can include instructions not only regarding end-of-life care but also other situations that may arise. With a power of attorney your agent will be able to act for you even if you are not terminally ill or permanently unconscious.
Your agent should be someone who understands your values and who will be willing to advocate for the application of those values to whatever situation may arise. Your agent can review the circumstances, consult with the health care providers, consider the prognosis, and then apply your values as set forth in the document, and as otherwise known to the agent through conversations with you, in making decisions.
3. Avoiding Abuse. In the wrong hands, a power of attorney can be an instrument of financial abuse and exploitation. The danger of abuse is particularly acute when the document includes the authorization to make transfers of your assets or to make changes to beneficiary designations and other elements of your estate plan. While planning for qualification for public benefits may require divestiture of the assets of the principal, it is unlikely that many individuals would want the quality of their lives to suffer as a result of such planning.
You need to have your lawyer limit the potential for abuse by building appropriate protections into your document. Of course the best protection is to choose someone as agent who is completely trustworthy and knows and will follow your wishes. But protective provisions can also be incorporated in your power of attorney such as (1) naming joint agents, (2) requiring approval by third parties for certain actions, such as transfers of assets, (3) limiting the persons to whom transfers can be made, (4) requiring equal treatment of all potential recipients of transfers, and (5) requiring the agent to file regular accounts or other reports with third parties.
4. Naming Successor Agents. Just as you may someday be unable to make financial and health-care decisions, there is always a possibility that the person you choose as your agent may become unavailable or unwilling to serve. Make sure you deal with this possibility by appointing more than one agent, either jointly or as successor. Also, consider giving your agent the power to appoint a successor or successors.
Conclusion. The power of attorney may someday become your most important legal document. A well-drafted power of attorney can be of inestimable value to you and your family. An ill-considered document can lead to disaster. If you underestimate the importance of this critical legal tool you and your family may someday pay a heavy price.