More than eighty percent of the population will need a Power of Attorney in their lifetime. But what does it do? How does it work? A Power of Attorney allows you to give another person the legal authority to sign your name. The Power of Attorneys (for Finances) we use most in our practice is an Advanced General Durable Power of Attorney (GDPOA). Our GDPOAs give the appointed agent broad authority that is transactional in nature (property transfers, beneficiary designations, paying bills, transferring a vehicle, etc.).
The appointed Agent is serving in a “fiduciary role.” In short, this person is authorized to make decisions on your behalf as you would make. This means it needs to be a person that is trustworthy and will have your best interest at heart. Typically, that person is a family member (spouse, children, sibling, etc.).
A GDPOA is something you need at all stages of your life; and your appointed agent might change throughout those stages. The three main stages are when you’re younger and have minor children, after the children are out of the house (empty nesters), and the senior years. Each of these stages bring financial changes (e.g. how much disposable income did you have at each stage) and require an updated Power of Attorney. Also, laws regarding Power of Attorneys change throughout the years.
What if you don’t have a GDPOA? There are costs associated with not having one. If you don’t have a Health Care Power of Attorney, the next of kin makes the decisions on your behalf if you’re not able to do so. It is not the same for finances. If you don’t have a Power of Attorney your loved ones will have to file for Guardianship. The process to appoint a Guardian can take months. You must petition the Courts to be appointed (don’t forget court costs), have a Judge appoint you as Guardian, then have the Judge give you permission to do anything outside of paying day to day bills. Any assets you own cannot be accessed during this process to pay your bills and cover your cost of care.
How do you know your GDPOA is enough? Laws change often. Most attorneys offer a standard or simple GDPOA that is fairly limited in the authority it allows. A short form Power of Attorney (typically 2 – 3 pages) is not sufficient for Asset protection planning. Power of Attorneys don’t allow for the transfer of the home (to avoid estate recovery if Medicaid is needed to help pay long term care facility costs). Agents cannot make transfers to themselves if the Power of Attorney does not specifically say so. For these reasons, and many more, be sure to see an experienced Estate Planning Attorney that deals with Power of Attorney issues often.
Call our office (919-256-7000) to schedule an appointment to have one of our Attorneys review your documents to ensure they meet your needs.