Most people understand the need to have a will, so that when they pass away, assets will go to their chosen beneficiaries. Most people do not realize that they also need to appoint a power of attorney to make financial decisions and manage assets for them, if they become incapacitated.
If you think about it, most any financial decision we make requires a signature. Selling a house, writing a check, entering into agreements, etc., all require that we be able to sign documents. A signature itself is not even enough; the law imposes a requirement that the person signing the document have sufficient mental capacity to understand what they are signing.
As we age, there is a greater possibility that a time will come when we are not able to sign important legal documents. Or, even if we can sign our name, we may not understand what we are signing. At that point, assets are frozen unless someone has been given the legal authority to make financial decisions for you. The best way to do this is through a power of attorney for finances.
A power of attorney for finances is a document you can sign to appoint another person to make important financial decisions for you in the event you become incapacitated. The person you appoint is called your “agent.” It is a good idea to name one or more alternate agents, in the event your first choice is unable or unwilling to serve in that role.
As an Elder Law attorney, one of the most common phone calls we receive is “I need to get power of attorney for my Mom.” My answer is always, “that’s great, we’d love to help your Mom. Let’s schedule a time for her to come in and discuss it.” “Well, that’s a problem,” replies the caller “because Mom has Alzheimer’s Disease, and she won’t understand what you are talking about.”
In this situation, it may be too late to get a power of attorney. A power of attorney must be signed by a person who is legally competent. This means the signer must have the ability to understand the nature and importance of the document. If someone already has Alzheimer’s Disease, or dementia, or has suffered a stroke, it may be too late to sign a power of attorney. Therefore, it is important to sign a power of attorney while a person has mental capacity to understand the document.
When deciding who should be your agent, remember that the most important qualities are honesty and good financial management skills. The main disadvantage to having a power of attorney is, a dishonest agent could use the power of attorney to misappropriate your assets. Therefore, only appoint the most trustworthy people to serve in this role. There are also professional trust companies that may agree to serve as your agent.
A power of attorney should always be prepared by an experienced elder law attorney. It is possible to obtain a generic power of attorney from a legal stationery store. However, this form will not give the agent the ability to make many types of important decisions for a disabled person. An experienced elder law attorney can provide a power of attorney that will give your agent flexibility to make important financial decisions if you are not able to make them yourself, such as disability planning, creating trusts, long-term care cost planning and tax planning.
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I have a married client who died without a power of attorney or a will. His final paycheck was made out to 'the estate of John Smith'. When the spouse tried to deposit the check into their joint checking account, the bank said the spouse needed a power of attorney. What is she to do now?
ReplyDeleteA power of attorney won't help because it expires upon the death of the person who signed it. If the spouse is the sole beneficiary under the will, I suggest that she ask the employer to reissue the check, payable to her. If the employer refuses, she may have no choice but to do a small estate probate. Let me know if we can help with that!
ReplyDeleteIf a spouse passes away and there were credit cards in the deceased spouses name only, does the surviving spouse have a legal responsibility to pay off the credit cards of the deceased spouse? Also, would there be any impact to the credit rating of the surviving spouse if the credit cards aren't paid off?
ReplyDeleteLaura, whether the surviving spouse has an obligation to pay the credit card debts of a deceased spouse depends on a lot of factors. Generally speaking, if the surviving spouse was not a signer on the credit card and received no benefit from the goods or services purchased, and if the surviving spouse received all of the deceased spouse's assets by survivorship or beneficiary designation, the surviving spouse is not liable to pay. It's usually worth having an attorney review the specifics of the situation and communicate with the credit card companies. Finally, if there is no liability, the surviving spouse should monitor his/her credit report to make sure his/her credit rating is not adversely affected. Great question!
ReplyDeleteWith regard to a person who has dementia, I am wondering who makes the final decision regarding whether the person is capable of signing documents to appoint a power of attorney? I work in home health and many of my patients are mildly demented and fluctuate between confusion and lucidity. I often find myself speaking with family members and suggesting they fill out advance directives and appoint a power of attorney. Your post makes me wonder about this grey area of dementia.
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