The purpose of this column is NOT to advise people on their legal affairs or concerns, but to provide basic information for discussion with their own legal counsel.
Written by Ruth Magnusson, Lawyer, Straith and Company
An enduring Power of Attorney is an essential tool for incapacity planning. “Incapacity Planning” means planning for the future management of your affairs in case you become unable to take care of them yourself due to mental incapacity. Your Will does not cover this. Incapacity planning must be done separately from your Will. “Incapacity Planning” means planning for the future management of your affairs in case you become unable to take care of them yourself due to mental incapacity. Your Will does not cover this. Incapacity planning must be done separately from your Will.
There are two basic documents you can prepare. Here we will talk about the first such document, a “Power of Attorney”. (The second document is a “Representation Agreement for Health Care” and is dealt with in a separate article.) A Power of Attorney is a document by which one person, called the Donor, gives another person, the Attorney, the ability to manage his or her financial and legal affairs. An “enduring” Power of Attorney is one which can continue to be used after the Donor has become mentally incompetent. If a Power of Attorney is not enduring it will automatically terminate if and when the Donor becomes incompetent. An enduring Power must contain this sentence: “ I DECLARE that this Power of Attorney may be exercised during any subsequent mental infirmity on my part.” Many people give enduring Powers of Attorney to their spouses and/or children. That means they appoint their spouse, or one or more of their children, as their Attorneys to manage their financial and legal affairs in case they become mentally incompetent. It can also be used if the Donor is not incompetent but needs assistance anyway, for example in case of physical disability. Sometimes people appoint a friend, or a brother or sister, or a lawyer or other trusted professional. Following are examples of people who have prepared enduring Powers of Attorney:
- A young couple with two infants. They appointed each other so their joint affairs could be handled by one of them if the other was sick or injured.
- A woman anticipating serious surgery; she gave Power of Attorney to her friend.
- An elderly man who feared he was in the early stages of Alzheimer’s. He gave Power of Attorney to two of his children.
- A mother of three feuding children who appointed her lawyer because she needed someone who was impartial and who could deal professionally with her affairs, and with difficult family members.
Financial and legal affairs that can be managed by an Attorney include virtually everything such as paying bills, selling real property, making investments, defending law suits, and signing contracts on behalf of the Donor. However there are certain exceptions, for example an attorney cannot change the Donor’s will. Clearly the power given to the Attorney is great. The Attorney must act honestly and fairly. He or she must use the Donor’s assets to care for the Donor, and must not benefit personally from the appointment. There are cases where families have taken court action because the Attorney was abusing his or her power, for example, by stealing money, or neglecting necessary tasks. The selection of an Attorney must therefore be made with care. Donors need to choose honest, competent and reliable people.
Sometimes a client wants to name all his or her children as Attorneys together, so all the children are involved in decision making. Often the motive is to ensure no one feels “left out”. However if family dynamics are not good, or there are too many children, or the children live far away, this may not be advisable. If more than one person is appointed as Attorney the Donor must decide if they may act separately or are required to make joint decisions.
A Donor can, so long as he or she is still mentally competent, revoke the Power of Attorney in writing at any time. A Power of Attorney terminates automatically on the death of the Donor, and then the Executor in the Will takes over. Or, if the Power is being abused or neglected a court can revoke the appointment of an Attorney.
It is important to note that an enduring Power of Attorney does not give the Attorney authority to make medical or personal care decisions such as giving consents to surgical procedures. This must be done separately in a Representation Agreement for Health Care. If a person becomes incompetent and has not completed his or her incapacity planning the family may be required to apply to the Court for the appointment of a “Committee”. This is expensive and time consuming and can be avoided by preparing the proper documents ahead of time.