In this episode, Tim will explore the purpose of this estate planning document and point out ways in which one type may differ from another.
WRVO Producer Mark Lavonier:
This podcast is part of the series Estate Planning Pro Tips, hosted by attorney Tim Crisafulli of Crisafulli Estate Planning and Elder Law PC an estate planning probate and elder law firm serving clients throughout central New York. A former school teacher, Tim explains complex legal subjects in an easy-to-understand way. The commentary focuses on the central aspects of estate planning, such as Wills, trusts, asset protection, long-term care, and probate. And now here's Tim.
Tim Crisafulli:
Confusion abounds about Powers of Attorney. This is because they are not all created the same. For starters, a Power of Attorney is a document wherein one person, the principal, appoints another person, the agent, as attorney in fact. Got that? The one creating the document is the principal, the one who holds the power is the agent. And the way you refer to the agent is as the attorney-in-fact. The whole reason anyone would have a Power of Attorney document in place is so that someone else is able to manage a principal's finances if ever the principal is unable to do so alone. For example, if you develop dementia, your agent or attorney-in-fact could step in to do your banking. Sometimes, clients try to shortcut this process by putting someone else on their bank accounts. This is often a very bad idea, although adding someone else as a joint owner does allow that other person to do your banking, it also makes the other person the actual owner of that account. So if that other person ran into legal issues, or that other person had a lapse of judgment, the account assets could disappear. By relying on the Power of Attorney document to allow someone else to help with banking, the helper never becomes the owner of the account, and the helper must comply with significant rules surrounding the handling of your assets. In sum, using a Power of Attorney rather than putting someone on your account keeps the assets far, far safer. Moreover, you can control where those assets go after your eventual passing, rather than just hope your co-owner will do the right thing. Remember earlier when I said not every Power of Attorney document is the same? Well, they aren't. It's heartbreaking when someone contacts Crisafulli Estate Planning and Elder Law and indicates that their parent needs Medicaid to cover the costs of long-term care and asks whether any assets can be saved. The answer? It depends. It depends on whether the parent is still competent to sign legal documents, and if not, it depends on whether the particular Power of Attorney the parent signed is broad enough to allow all the restructuring of assets. Often an off-the-shelf or from the internet Power of Attorney lacks the additional language necessary to ensure that all the things that must be done to help the parent actually can be done. Absent a high-quality Power of Attorney, the family either loses more than it needed to or commences an expensive court proceeding in the hope that a judge will appoint someone as guardian and empower that guardian with the authority to restructure assets. In sum, it's important to have a Power of Attorney document in place. But beware, they are not all of the same quality.