A durable power attorney (sometimes called a financial power of attorney) is one of the most important estate planning documents. But not all powers of attorney are alike. Using a form power of attorney that you purchase online or at an office supply store could be a very costly mistake. While a power of attorney form might suffice for simple situations such as paying bills and even selling property, you really need a power of attorney customized for your situation. Without a the right power of attorney, your loved ones may not be able to fully manage your finances, or take key steps to preserve your estate if you become incapacitated.
There are many do-it-yourself power of attorney forms available online and otherwise. Yes the cost may be cheap but there are many issues to consider. A form power of attorney may not be right for you. It’s better to let an attorney draft a customized power of attorney for you.
One way that many form powers of attorney fall short is that they do not include key provisions, or they do not reference appropriate North Carolina law for powers of attorney. As a result, the person you appoint to act for you (called an “agent” or “attorney in fact”) can’t act because the language in the power of attorney is too limited and not comprehensive enough. Many times the power of attorney is very brief, and does not go into sufficient detail about what the Agent can do for access IRAs, or stock accounts. In those situations, we often find that banks and other IRA custodians refuse to follow the request of the Agent.
Another problem that can occur is that some powers of attorney appoint two people to act for the signer. Unless written properly, those agents may need to sign everything and make all requests together. That can become very time consuming and even impossible. In one situation, two children were named as agents to act together in all matters. However, one of the children was in the U.S. Navy and deployed for a year at time. Obviously that caused many problems because that Agent was not available to act.
The power to make gifts of your investments and of your real estate is especially important. Often when one spouse needs nursing home care, or has Alzheimer’s and is likely to need nursing home care, it will be best to transfer the home into the healthy spouse’s sole name. That’s because if a husband and wife bought real estate together and both names are on the deed, that property will pass automatically to the surviving spouse due to the property being held as tenancy by the entirety. That is usually fine but what would happen if the ill spouse is in the nursing home and the healthy spouse dies first? It can happen. Here’s an example.
Bob and Mary live at home. Mary has Alzheimer’s and Bob provides for her care. He is the primary caregiver, but he also pays to have care brought into the house that he oversees so he can take some breaks. However, if Bob wasn’t able to live at home, clearly Mary would need to move to a facility because she could not live at home. What happens if Bob dies? He could have an unexpected heart attack. Or he could get a devastating diagnosis of terminal cancer and now its just a matter of months before he passes on and Mary will need to move away from the home.
In this situation, if Bob predeceases Mary, then the home will go to Mary as the surviving spouse. As a result, when she needs nursing home care, she will own a home. That home won’t disqualify her from Medicaid assistance. However, if Mary owns that home at her death it likely be lost to the state as a result of North Carolina estate recovery. In other words, the home would be exempt for purposes of eligibility but it is not “protected”. So for this situation Mary should deed the home over to Bob. That works fine if Mary can sign the deed. However, if Mary’s power of attorney lacks key gifting clauses, then no one can sign that deed for her. To protect the home and Mary, the family would need to go to court; and there is no guarantee that the court will allow the family to protect the home. Even if Mary’s family is successful, they will spend thousands of dollars that could have been saved with the right provisions in Mary’s power of attorney.