Importance of a Durable Power of Attorney

Lori SomekhPower of Attorney, WillsLeave a Comment

5 things you won’t find in your standard power of attorney…

If I had a quarter for every time a prospective client told me “Oh, we have a power of attorney – I printed one from the computer” or “I got one from the title company”, I wouldn’t need to buy any more lotto tickets. I think because powers of attorney are such common sounding and basic documents, people think of them as one size fits all commodities. They don’t see them as sophisticated legal documents that merit the expense of an attorney. For seniors, however, this can be an irreparable mistake. Here’s why:

A properly drafted durable power of attorney can be an indispensable estate planning tool. What we run into all too often in elder law is people who have assets and suddenly find themselves in need of long term care, such as a stay in a rehab or a home health aide. This might arise if a person has a debilitating stroke, for example, and is not able to execute documents such as deeds, trusts or transfer paperwork that would be necessary to get assets transferred on an emergency basis.  What happens then is the family must spend thousands of dollars and many months having a guardian appointed, just so someone has the authority to transfer assets.  And while that proceeding is pending (that’s the many months part), the person may be racking up a $15,000/mo. nursing home bill.

Many people are not aware that Medicare and private health insurance do not cover rehab and nursing home stays except for a very brief period.  In general, Medicare will cover the first 20 days.  Then, if the patient is responding well to physical therapy, it may pay 80% for the next 80 days.  Even if it does, that still leaves approximately $166/day for the patient to pay privately.  After that, the patient is strictly private pay, unless he can be made eligible for Medicaid.  That is where emergency planning comes in.  It may be necessary to shift around a lot of assets in order to keep them – or some of them – in the family.  This is where it becomes critical to have the proper type of power of attorney in place, with the proper powers, executed correctly.

My unscientific guess is that out of 20 do-it-yourself powers of attorney that I look at, one might be done properly enough that we could use it in these types of situations.  As for the other 19, they may be stuck doing a guardianship.

So here are five things you won’t find in your standard, do-it-yourself power of attorney:

  1. You will certainly not find the power for your agent – typically a spouse or child – to transfer substantial assets to himself.  Why is this a problem?  Because that is exactly what they may need to do in order to protect the assets.
  2. You will not find the power to execute a trust.  This is important for exactly the same reason.
  3. You will not find the authority to change beneficiaries on IRAs.
  4. You will not find the power to engage in Medicaid planning, which can involve any number of things that must be done in order for the patient to receive Medicaid benefits rather that private pay.
  5. You will not find the power to join a pooled income trust to shelter income for Medicaid eligibility purposes.

So, yes, powers of attorney are relatively basic and inexpensive documents. However, this is a document you want to get right so that it can serve its intended purpose – which is to save you a tremendous amount of money and aggravation when the time comes that it needs to be used.

It’s like that Bayer aspirin commercial: “Jill’s heart attack did not come with a warning…”  Most of what I do in my practice is “emergency” planning.  That means helping people who have had a medical emergency and didn’t have the basic planning documents in place.  The good news is that we can still help people who did not plan, but we can help them a lot more and for less money when they did.

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