MAY 26, 2014 VOLUME 21 NUMBER 19
If you have had your estate plan prepared or reviewed by one of the lawyers at Fleming & Curti, PLC, you almost certainly have signed a durable power of attorney. You may have signed a document prepared by another lawyer, or even found one online or in a document kit. Regardless of where you got your power of attorney, it is probably the single most important document in your estate plan. It is the Rodney Dangerfield of legal documents — it seldom gets the respect or attention it deserves.
Why is the power of attorney so important? Because there is a high likelihood that you will experience a period of diminished capacity before your death, and a high likelihood that no probate proceedings will be required when you do die. Your will is an important document, but it has no usefulness while you are still alive. Your health care power of attorney is an important document, but it is less likely to be pivotal in handling your personal affairs at the end of your life. Your trust is important, but even if you transfer all of your assets to the trust’s name there is the possibility that assets will slip out of the trust over the years — making your power of attorney essential to get assets retitled after your capacity diminishes but before your death.
No doubt about it — your financial power of attorney is a central component of your estate plan. It is also probably the single most dangerous document you will ever sign. Think about the power you are giving to the agent you name in your power of attorney: it is a literal license to steal. Of course you can trust your family and close friends — but you should know that when exploitation of vulnerable seniors does occur, it is almost always involves misappropriations using a power of attorney.
So if this document is critically important, and terribly dangerous, what should you consider before signing it? There are number of pieces of advice we can give you about your financial power of attorney:
- Sign one. Yes, it is dangerous — but it is important to have one in place. Arizona lawyers will tell you that the Arizona probate process is not as complicated, expensive or time-consuming as people think it is — but the similar process for getting control of living people’s financial affairs (called “conservatorship”) is everything people think they should hate about probate. No power of attorney in place when you become incapacitated? Your spouse can not handle your finances automatically. Your will provides no assistance. Your finances are likely headed to probate court.
- Consider opting for a “surviving” power of attorney rather than a “springing” power. Many of our clients are uncomfortable signing a power that could be used while they are still competent to manage their own affairs. They say (and reasonably so) that they want to handle everything themselves so long as they are able to — and there’s no reason to expose their assets to problems unless they become incapable. Fair enough, but if you do not trust your named agent to behave properly while you are still able to watch, why would you ever put them in charge of your affairs precisely when you are most vulnerable? Do you realize that by making the power effective only upon your incapacity, you are forcing us to get some kind of certification that you have become incapacitated? And what about the time when you are just making slightly foolish decisions, or have just become somewhat inattentive — do you really mean to prevent your agent from acting during those times? Nationwide, the trend is toward powers of attorney that “survive” your incapacity, rather than “springing” into existence when you become incapacitated.
- Sign your bank’s power of attorney form, too. The powers of attorney we prepare are works of art. They cover countless items that you would never think of, and even your bank’s lawyers would never think of. They are beautifully crafted, and they are worth every penny you pay for them. But your bank is stuck on this odd notion that their two-paragraph form is better, and they will keep trying to get you to sign it. We say: give up. Just sign their form AND the beautifully-crafted power of attorney we prepare. It will make your agent’s job easier. The same thing goes for your brokerage house, too — let’s get their form and get it signed. Let us help you get the right form, too, since the bank teller or brokerage house clerk you talk to will often hand you the wrong form, and you’ll end up creating a joint tenancy account with your agent rather than giving them a power of attorney.
- Learn the language. Impress your neighbors, friends, and bankers. The person named in your power of attorney to handle your affairs is called your “agent” (or, if you want to be more old-fashioned, your “attorney-in-fact”). They are not your power of attorney — that term is just for the document itself. So when your agent signs documents for you, they can sign as something like: “John Doe, as agent for Janet Rose” or “Janet Rose, by her agent John Doe.” This, of course, assumes that your name is Janet Rose, and your agent’s name is John Doe. You might need to make appropriate changes.
- Make sure your agent knows where to find the document. You don’t have to give any of your estate planning documents to your family while you’re still alive. Some people prefer privacy. Some do like to hand out copies, and that is also fine. But whether you actually give a copy of the power of attorney to your agent or not, we do urge you to let him or her know that it will be his or her job to get the document and take charge if something should happen to you. That means you have to keep the document somewhere it can be located, and update your information as you update the document.
- Update your power of attorney. Speaking of keeping things current, we do think it is a good idea to sign a new power of attorney every five years or so — even if you are not making any changes. Our beautiful form (see above) changes gradually over time as we add new items (our latest additions to the language of most powers of attorney: provisions for pets, and for your online accounts). The law changes gradually, and old documents are usually grandfathered in when there are changes. But it just makes sense to try to have a document that was signed in the same decade (or so) as it is being used.
We hope those tips help. Let us know if they trigger anything that makes you think you need to update your documents.
