What is a Power of Attorney?
When it comes to your affairs, you want to have someone you trust in charge in the event that you become incapacitated. Legally, to name someone as your "agent", you need to have a power of attorney. This documentation is a standard piece when it comes to estate planning, but what if you haven't done any planning and you still want to name an agent? In this case, you can use the form provided by the state. Though like many other cases, because this form isn't personalized to you and your situation, it has limitations.
What happens if you don't have a power of attorney?
If you become incapacitated without a power of attorney, there's no one legally able to make decisions about your finances, business, private affairs, or other legal issues. In this case, you (and your family) will get the state's default plan: a conservatorship proceeding in front of the magistrate judge.
This proceeding will name a conservator to manage the affairs for you but is subject to the continuing jurisdiction of the court. In plain English: your family will be back every year to file annual accounts for court approval.
In the event that you need any Medicaid or VA planning, the process becomes three or four times more difficult (expensive, time-consuming, etc.). The types of planning we need to do qualify for these benefits all fall outside of the conservator’s statutory authority. So if we want to do any of that, we need to go back to court and get permission. This means notice to all of the attorneys, all family members, etc., and then show up for a court hearing. What this usually means is that we just spend every dime of the protected person until we qualify. Then we’re left with nothing for any discretionary items not covered by Medicaid (TV, new chair, getting your nails or hair done, new clothes, etc.).
Obviously, this is not the situation you want to live in or leave for your family. Let's cover another option.
What if I have a Statutory Power of Attorney?
Though this form is cheap and easy, you get what you pay for. The form itself is not self-explanatory and leaves you to a lot of guesswork when it comes to what you need to plan for in the future.
For example, the form does not authorize the precise planning techniques needed for Medicaid planning. This is by statute a health and welfare regulation. For example, one technique (and only one of many) if a person needing assistance in paying for long-term care, i.e. in-home care, assisted living, etc., has income exceeding $2225 per month. Idaho (along with many others) is a "cap" state, meaning if you make $2226, you don’t qualify. But, you can use what’s called a Miller trust to still meet the income requirement. However, if you’re attempting to do this with a power of attorney, the Department of Health and Welfare will ignore the Miller trust IF your power of attorney does not specify by name, the agent’s authority to do it. If you look at the statutory form, you won’t see it on there. Bottom line: this form is not better than no planning for Medicaid qualification.
The state form does not ensure that you will get appropriate instruction on how to sign and use the form. Unless you accidently mark the right provisions, no more helpful than no planning at all.
Finally (for our purposes here) most financial institutions, banks, credit unions, investment firms, insurance companies, etc., will not honor an "old" power of attorney. How old is old? Five years or more has always been an issue with us. In some cases, six months was too old. The response from the financial institution was always something like, “You’ll need to have her sign a new one.” Of course, the reason we were using the power of attorney in the first place was because Mom is now incapacitated, she can’t sign a new one.
The statutory form is usually better than nothing, just as the title says. But, if we had to quantify that, we'd say that at least three times out of five, when a client has a statutory form, it was not better than no planning. In at least one (or more) other times out of five, we had to be really creative with the statutory form and we got some things done that might be stretching the concept of a power of attorney a little bit. But, because the family would be only one to object and the family was trying to help, we got it done (and nothing has come back so far).
To make sure you're covered, we recommend a custom Legal Life PlanTM from Idaho Estate Planning. This will ensure that your wishes will be followed without any of the limitations of a conservatorship or the statutory form. Contact us today to get started!