One of the simplest, least expensive and smart estate planning documents is for an older adult to complete a general durable power of attorney (POA) document. A power of attorney is a written document where an individual authorizes one or more people to act on the individual’s behalf regarding property and financial matters.
Imagine being hospitalized and incapacitated after contracting Covid-19 or being in a coma after suffering a head injury in a car crash. Who will pay your bills and/or manage your financial affairs? A power of attorney allows your loved ones to take care of your finances without having to deal with court proceedings.
A durable POA allows an “attorney-in-fact,” i.e., the agent of your choosing, to take action once you (i.e., the principal) becomes “incapacitated.” The best part is that you get to choose who will act for you. It could be a spouse, an adult child, or trusted friend.
If you do not have a POA and become too ill to manage your financial affairs, it may be necessary for a loved one to petition a court to appoint a conservator (or guardian, depending upon your state law) of your property.
If a court proceeding is needed, you may not have the ability to choose the person who will act for you. Even if you have a spouse and/or adult children, the court could appoint someone you don’t even know, i.e., a stranger, to control your assets. If that bothers you (and it should), it is much easier, much safer and much cheaper to have an agent in place through a POA.
Do not assume that being married means you do not need a POA. If you become incapacitated and are no longer competent because of a stroke or an accident, your spouse cannot access bank accounts in your name alone, sign contracts and other legal documents on your behalf without a POA.
Powers of attorney are common for seniors but should be considered for all adults over 18. Parents with children over 18 may not realize that they can no longer act on their child’s behalf without these documents. A POA allows the parents to continue to help make important decisions for their young adult child in the event of incapacity.
Keep in mind that a POA is a legal document. It must be signed when you are legally competent to do so. If you have bank accounts and/or own a home, you need a power of attorney.
You say, “But Judd, I don’t want to lose control of my assets while I am healthy.” No problem. A POA is safe. A POA may take effect immediately, or only upon the determination that you are unable to act for yourself due to mental or physical disability, i.e., your incapacity. The latter is called a “springing” power of attorney. Furthermore, a POA may be amended or revoked at any time.
You say, “But Judd, I signed a POA years ago.” If your POA is five years old or older, it might not work when you need it the most.
Although your POA might be valid under your state law, many banks are taking the position that federal law, i.e., the USA Patriot Act passed shortly after Sept. 11, 2001, takes precedent over state law, i.e., it is pre-empted.
For banks, investors, financial advisers, intermediaries, broker/dealers, commodity merchants and the like, the practical result of the Patriot Act’s Title III provision effectively translates to unprecedented levels of due diligence on any corresponding accounts that exist in money-laundering jurisdictions throughout the world. For this reason, many banks are taking a “better-safe-than-sorry” approach to gathering as much information as possible.
My understanding is that at least one national bank, pursuant to the Patriot Act and other federal legislation and regulations, takes the position that it has the discretion (and perhaps the duty) to verify the identity of the person with whom it is being asked to do business, as part of the federal program to deter money laundering, that its action or inaction on a POA is an exercise of that discretion or fulfillment of that duty.
Financial and other institutions often impose their own requirements with respect to their willingness to recognize and act on a durable power of attorney. To be safe, take your POA to the bank, brokerage firm or other financial institution with which your agent under the POA is likely to have dealings. Ask them to review it and make sure it would be honored. The institution may require that any durable power of attorney be executed on its own for.
In conclusion, why not make it your 2022 New Year’s resolution — execute (or re-execute) a valid POA. After all, nobody wants to be subject to a public proceeding called a Guardianship or Conservatorship.
So, executing your POA to avoid the high cost and delay of a court proceeding is extremely important. For your peace of mind, along with a will and living trust, a financial and health care POA needs to be part of everyone’s estate planning documents.
Judd Matsunaga is the founding attorney of Elder Law Services of California, a law firm that specializes in Medi-Cal Planning, Estate Planning and Probate. He can be contacted at (310) 348-2995 or firstname.lastname@example.org. The opinions expressed in this article are the author’s own and do not necessarily reflect the view of the Pacific Citizen or constitute legal or tax advice and should not be treated as such.