QUESTIONS AND ANSWERS
WHAT IS A POWER OF ATTORNEY?
A power of attorney is a legal document by which you designate another person to act on your behalf in the event that you are unable to take care of your own affairs as a result of physical disability or mental incapacity.
For example, through a power of attorney you can authorize your representative to handle your banking, manage your investments and pay your bills in the event you are unable to do these things yourself.
WHAT ARE THE ADVANTAGES OF HAVING A POWER OF ATTORNEY?
Just as a Will provides for the handling of your affairs upon death, a power of attorney can provide for the handling of your affairs if a physical or mental condition prevents you from handling your financial affairs yourself.
If you become disabled, the outside world and your financial obligations do not come to a stop. Bills have to be paid. Checks have to be deposited. Financial and/or legal decisions have to be made.
WHAT HAPPENS IF I BECOME DISABLED OR INCAPACITATED AND I DO NOT HAVE A POWER OF ATTORNEY?
If you are unable to handle your own affairs, a court will appoint a guardian or conservator for you. This involves the commencement of legal proceedings and the hiring of lawyers, the expense of which will be paid out of your assets. In addition, a court, not you, will decide who handles your affairs.
DOES A POWER OF ATTORNEY GIVE ANOTHER PERSON THE AUTHORITY TO ACT ON MY BEHALF EVEN IF I AM NOT INCAPACITATED?
You may choose to make your power of attorney effective immediately. However, you have the option of providing that the power of attorney become effective only if you become disabled or incapacitated. You can also specify under what conditions you will be considered disabled or incapacitated for purposes of the power of attorney.
For example, you can provide that the power of attorney becomes effective only upon the furnishing of a sworn statement from two physicians that you are incapacitated.
DO I HAVE TO DELEGATE ALL OF MY DECISION-MAKING AUTHORITY TO MY AGENT OR CAN I PICK AND CHOOSE THE ACTS THAT MY AGENT CAN PERFORM?
One of the most significant problems with powers of attorney is that some powers of attorney give agents too much power and that some give agents too little power. This problem can be the result of a person utilizing a form that he or she finds on-line, thinking that a power of attorney is a “one size fits all” document. Even when the power of attorney is generated by an attorney, the “one size fits all” mentality is, unfortuantely, still utilized all too often. In this regard, many attorneys present the same form to every client without educating the client about what powers the form grants the agent and without encouraging the client to review the form carefully and decide what powers the client may want to exclude.
In summary, every power of attorney should be customized to meet each person’s needs and comfort level and powers of attorney can and should be drafted to specify the acts that an agent is authorized to perform.
ARE THERE POWERS THAT I SHOULD NOT GRANT MY AGENT?
Some powers of attorney include provisions that allow agents to make gifts. A gift-giving provision, in the wrong hands, can allow an agent to deplete a persons assets to the point that the person no longer has the necessary means of support. Recently, John J. Ross, in his capacity as attorney for Adult Protective Services of Monmouth County, had to take legal action to address one situation in which more than $1,000,000 in assets was transferred pursuant to a power of attorney and another in which more than $600,000 was transferred through a power of attorney.
Gift-giving provisions, in the right hands and under the right circumstances, can allow assets to be protected for a husband, wife or other family member if a nursing home placement occurs. Such provisions, however, should only be included after serious thought and a thorough weighing of the risks. This includes an honest assessment of the trustworthiness of the agent and successor agents you are selecting and how much you really care about preserving assets for someone else.
WHERE DO I GO TO OBTAIN A POWER OF ATTORNEY?
Power of attorney forms are available from a number of different places such as banks and legal supply stores. It is often wise to speak with an experienced attorney particularly if you wish to insure that the power of attorney will be honored by various institutions or if you wish to appropriately specify and/or limit the acts which your representative will be able to perform.
No matter how you go about securing a power of attorney, it is important to address properly all of the issues discussed above, including but not limited to selecting carefully the powers you will be granting.