Power of Attorney

When I sit down with people for the first time to discuss estate planning, it is usually because they tell me that they need a Will. My response to them is almost always the same, "You actually need a power of attorney more than you need a Will." People are often surprised to hear that. The reason that a power of attorney is more important than a Will is because most of the time if a person dies without a Will, their assets will typically go the people that they want to receive them by law. However, if you become incapacitated during your lifetime, there is no law that automatically appoints someone that has authority to pay your bills, discuss or transact on your investments, retirement accounts or perform any other financial tasks you would normally do yourself. People erroneously believe because they are married or have their spouse or children named as beneficiary on these accounts that they automatically have the right to make necessary changes to those accounts, but that is not the case (unless the account is joint). If you got sick, your spouse and/or your child would not be able to take money out of your IRA, annuity, or sell your house (even if it was joint with your spouse), unless he or she was named as your agent in a power of attorney document. If you didn't sign one, your family may find themselves having to go to Court to request someone be appointed as guardian of your property. A guardianship proceeding can be very costly and invasive process that can easily be avoided if you have a power of attorney in place.

It is important to note that when you sign a power of attorney, you are not giving up any of your rights to handle your finances. You are simply designating an individual, known as your agent, to do anything that you could do as enumerated in the power of attorney document. The document directs that the agent has to act in accordance with any instructions that you give to him or her or if you are incompetent, then solely in your best interests. A power of attorney can also be revoked at any time during your lifetime if you change your mind about who you want to act on your behalf.

As the population of Western New York continues to age, we see our oldest members spending their final years in skilled nursing facilities. Although a stay in a nursing home is almost never a life event that one plans for, a broken hip, a sudden stroke, advancing dementia and a variety of other events can make it unavoidable. The shocking reality that accompanies the need to remain in a skilled nursing facility is the fact that these facilities can cost anywhere from $350.00 to nearly $500.00 a day.

As such, if one of your objectives is to preserve and protect your assets from long-term care costs, a power of attorney should allow for unlimited gifting in the modifications section (in case you or your spouse couldn't do that planning on your own). If properly drafted, this gifting authority allows your agent to take all steps necessary to protect and preserve your assets from long-term care costs. Without the modifications section drafted to allow unlimited gifting authority, your agent would be limited to transfer a maximum of $5,000.00 each year and all of your assets above the Medicaid resource levels might have to be used pay for your care if you couldn't sign to do any of this planning on your own.

Even if you already have a power of attorney, you should review it and see what it allows with respect to gifting and transferring of assets for Medicaid purposes, if anything. If it doesn't allow for transfers or gifting and one of your objectives is to be able to protect assets from long-term care costs, you should consider having a new power of attorney prepared. It should also be updated if one of your agents is sick or has passed away. Having successor agents named helps prevent a guardianship proceeding in the event that none of your agents can act for you and you no longer have capacity to sign a new document. 

For those of you who do not have a power of attorney in place (regardless of whether you are 18 or 80 years of age) get one as soon as possible. Unfortunately, unexpected things can happen to us at any age but if you are proactive and sign a power of attorney while you are healthy, it can make s huge difference and help minimize the stress of an already stressful situation for your family in the event that a crisis situation occurs.

Written by Jamie M. Smith. Esq.

Smith Vavonese, LLP