How can a Power of Attorney save your Assets?
Are you familiar with a Power of Attorney and how it can help your loved ones? I’m Leslie Sultan. I’m an estate planning attorney in New York, and I want to share with you the importance of a Power of Attorney.
I’m going to start with the definition. A Power of Attorney is a legal document that would give you the authority to give someone else power to make decisions on your behalf. This includes financial decisions and other legal decisions. So in New York, we call the person giving the power the “principle” and the person receiving the power (or authority), the “agent.”
Here’s an example. One common way we use a Power of Attorney is to help our parents. So, for example, if you have elderly parents and they may be having memory issues, especially short term that might lead to something worse, and you feel there is a need to protect their assets from accidental mismanagement, you would ask your parents to give you a power of attorney, or to give it to their spouse and then name you as a subsequent or successor agent.
So why is this important? I’ll share a story to demonstrate. I have a client who came to me recently because his mother is having short term memory issues that they know is advancing into early dementia. His stepfather had some memory issues and then became sick from COVID-19. He recovered physically from COVID-19, but unfortunately couldn’t remember anybody or anything. Complete amnesia. So the son came to me to help him with his mother and stepfather. His mother still had capacity to make decisions for herself so we could help her prepare for the future by having her execute a Power of Attorney naming her son as her agent. The solution for the stepfather was to file a guardianship petition with the Court.
What is a guardianship petition? Well, that’s the procedure to deal with someone who lacks capacity but did not set up a Power of Attorney to appoint an agent of their choice to act on their behalf. Without the Power of Attorney, a Judge has to consider an application for someone to be appointed as the “guardian” for the incapacitated person in order to make decisions for them. For my client, the stepfather owns an apartment and needs to be able to transfer the asset out of his name in order to qualify for Medicaid to pay for his now long-term health care. But the stepfather lacks the capacity to legally execute documents to complete this transfer. So he is now in a complicated and messy situation. The Guardianship process is litigation. It usually involves an attorney to represent the person seeking to obtain authority over the incapacitated person and their assets. Attorneys usually charge an hourly rate or an expensive flat rate for this type of litigation. My client was going to have to hire me to file a petition with the Court and prepare him for a hearing to convince the Judge why he should grant my client’s request to be his stepfather’s guardian. This process also takes approximately 4–6 weeks, which is a significant amount of time to wait to take care of someone. During that time, the bills would accrue and no one would be able to pay them.
Now for the plot twist. My client mentioned that his stepfather had a lot of paperwork laying around the apartment. I suggested he go through those papers, page by page, to see if he could uncover a signed Power of Attorney. So, spoiler alert… this story has a happy ending. My client went through those documents and found the Power of Attorney signed by his stepfather, naming my client’s mother as his agent. This meant there was no need for the long, drawn out, expensive guardianship process. My client saved thousands of dollars and months of time because his stepfather took a few minutes (and paid likely a fraction of the cost) to sign a Power of Attorney giving the legal authority to another person to act on his behalf. This was a big win for my client.
I wish all my client stories had this same outcome. How about your family? Do your parents have powers of attorneys? How about your spouse or loved ones? Have you spoken to them about this? Its a tricky but important conversation to have, because what would happen right now if something happened to them and they didn’t have the capacity to make decisions for themselves? Who would step in to take over, go to court, shell out attorneys fees? Would your siblings fight about this? And what if something happened to you?
I share these stories to empower and educate people on the importance of Estate Planning and how it can keep your family and loved ones out of court and out of conflict. I’d love to hear if you have a story about a Power of Attorney (or lack thereof) and if you have any questions, please share in the comments below.