Incapacity Planning: Be Discerning When Choosing Attorneys-In-Fact
It’s a simple question, but the answer can be quite complex: who will make decisions on your behalf if you become incapacitated? In the world of incapacity planning, durable powers of attorney and the selection of attorneys-in-fact are crucial.
You should be discerning when you are engaged in the process of incapacity planning. The individuals you choose to act in your interest – known as attorneys-in-fact or agents – should not just be people you like, but capable individuals whom you can really trust. For instance, when you are choosing a financial decision maker, you should clearly pick someone who understands how to handle money, and who will respect your wishes for where your money will go.
With a durable power of attorney, your agent can make decisions in your behalf after you become incapacitated.Without the designation of “durable,” your agent’s power of attorney will not allow him / her to take such actions. Many states today have laws that say POAs are presumed to be effective during the incapacity of the principal, unless directed otherwise.
Many jurisdictions allow for “springing” durable powers of attorney. These powers will not take effect unless the grantor becomes incapacitated, making them useful in an incapacity planning context. In fact, it must be proven that you are incapable of managing your own affairs, in order to ensure that you remain in charge as long as you are capable.
Since there is no law in most states (including Ohio) that requires a financial institution to accept and honor a financial power of attorney, the trend among savvy estate planning lawyers is to write POAs to be very broad. The idea is that making the legal instrument more specific and detailed will increase its acceptance. But this advantage of a broad power of attorney is also a weakness when one considers the possibility of elder financial abuse, a troubling trend in the US today.
Nobody wants to imagine any of their own family members taking advantage of them financially, but people do fall prey to temptation. In fact, one study estimates that of the 4 million reported abuse cases in the US each year, a third of the incidents were perpetrated by one of the victim’s family members. When a broad power of attorney instrument offers no oversight for the agent’s powers, it can become a convenient tool for abuse.
To help prevent financial abuse, we recommend POAs that include oversight for the most “dangerous” agent powers. Those are the so-called Hot Powers that could be used to modify your estate plan. Some of an agent’s powers will include routine matters that do not require oversight, for the sake of efficiency. However, there are a variety of methods of oversight that will likely be appropriate, given one’s circumstances.
Your estate plan should include another power of attorney for health care decisions. When it comes to health care decisions, you should pick someone who understands how you think when it comes to these types of choices. In addition, you should consider the emotional demands of the position. A health care agent must be cool under pressure because he or she may be called on to implement your wishes about artificial life support that would only serve to prolong the process of dying and cannot improve your health.
And, the individual should be firm and decisive when it comes to decision-making. Family members could have differing opinions, but the ultimate decisions must be made by the agent that you have selected.
For more guidance on getting your incapacity planning in order, we invite you to give us a call at (513)721-1513.