Powers of attorney do not prevent guardianship

A general durable power of attorney (GDPOA) is often suggested as a means of avoiding guardianship or “living legalization.” Although such a document is an important tool in a comprehensive estate plan, the GDPOA alone, or in conjunction with just a last will and testament, may not provide the protection that the creator seeks.

A GDPOA is a legal document that allows the “principal” to designate another person (the “agent” or “attorney-in-fact”) to carry out the principal’s business and financial affairs on behalf of the principal. This document is intended to assist in the absence of a director or during a time when the director may be physically or mentally incapable of conducting business. Since the document is “durable”, it will remain in force and effect even if the director is legally incapacitated. To be effective for real estate transactions, the GDPOA must be registered with the clerk’s office in the county where the property is located. A GDPOA is distinguished from a health care power of attorney and a limited power of attorney by its broad scope and application to a wide range of financial matters.

A durable power of attorney does nothing to help plan for disability, incompetence, or incapacity, and does little, if anything, to avoid guardianship. A power of attorney that is not durable is annulled when the principal becomes incompetent or incapacitated. Consequently, of the different forms of powers available, it is the GDPOA that offers the most planning possibilities for cases of disability, incompetence or incapacity.

However, in practice, GDPOAs can be quite weak and ineffective. Although powers of attorney are very common and the notion of a GDPOA has become very popular, agents who have power of attorney documents have not always been treated as if they were in the place of the principal. Individuals and institutions routinely reject GDPOAs when they arise. Elderlaw attorney Scot Selis writes on SeniorLawToday.com:

“If you have ever been frustrated by an organization’s refusal to comply with a durable power of attorney, you are not alone. A power of attorney allows a person to select another person or persons to handle their financial affairs. However, many Financial institutions frequently refuse to honor a duly signed power of attorney and witness. ”

In fact, it is frustrating for an agent to find his powers rejected or neglected in transactions on behalf of a principal. But the refusal to properly execute a GDPOA also undermines the intent of the director, who, in doing the GDPOA, generally assumed that he was making things easier for his family. Although an agent may petition a court of appropriate jurisdiction to enforce its lawfully exercised powers, the prospect of having to litigate transactions that should take place in the ordinary course of business is more than frustrating. Litigation is costly and time-consuming, and it is never the principal’s intent that the GDPOA does.

The problem is so widespread that groups of lawyers have complained to legislators, Attorney General’s offices, and Commerce Departments about banks requiring the use of the bank’s own power of attorney forms and banks refusing to comply. with the powers of attorney in general. While these complaints have, over the years, resulted in more uniform legislation governing the GDPOA, practical problems persist.

There are a variety of reasons why an individual or institution may reject a GDPOA. The most common reason given is that the GDPOA is “out of date” or too old. However, this reason is not based on any legal rights, privileges or responsibilities of the bank or institution. Most states allow a GDPOA that does not expire. Banks commonly reject these documents, supposedly, on the basis of their age.

Another reason given is that the GDPOA is not recorded. The registration of a GDPOA is, as mentioned, necessary for conducting transactions involving real estate, but is generally not required for other financial transactions. However, a person or institution may require that the document be registered. However, the recording may not be the best for the client, especially if it is unnecessary. Once registered, the GDPOA becomes a public record, available to anyone who requests it. A recorded GDPOA, certified by the county recorder, can be a dangerous instrument in the wrong hands.

Another reason often given for rejecting a GDPOA is that the GDPOA does not allow the agent’s authority to carry out the intended transaction. This reason is based on the law, because an individual or institution may be liable if the GDPOA is accepted to carry out an unauthorized transaction by the GDPOA. Also, if the person or institution is notified that the agent is doing something that is not permitted by the GDPOA, the person or institution facilitating the transaction by accepting the GDPOA may be liable.

This potential liability is, of course, a major disincentive for individuals and institutions that are asked to accept a GDPOA. This disincentive is particularly acute when the agent seeks to close an account or liquidate a policy or asset using a GDPOA, because the individual or institution cannot know the final disposition of the proceeds. For example, if the GDPOA does not allow the agent to make gifts to the agent or third parties, or if state law prohibits such transactions, the institution may fear that closing an account or liquidating an asset could facilitate an improper gift. .

Regardless of the reasons given, the motivations for rejecting a GDPOA are many, ranging from adequate to ignorant to inappropriate. The proper motivations are many. Institutions may prefer legal certainty and protection from probate court approval. In such a case, the filing of the GDPOA may actually cause or influence to cause a guardianship application. The institution may, in good faith, suspect a misuse of the GDPOA. The institution may even suspect that the agent is incompetent or has a disability.

Inappropriate motivations for rejection of a GDPOA include the desire to maintain and maintain control of an asset, prevent the discovery of improper asset management, undue influence from persons other than the agent, and disagreement with the intended use of the asset. assets by the agent when the intended use is lawful. However, there may be no way to distinguish adequate from inadequate motivation, because whoever rejects the GDPOA will never admit to inadequate motivation.

Compounding the difficulties in getting institutions to accept a GDPOA are the motives of family members seeking to control an older person’s estate. Many GDPOAs are simply replaced by a family member requesting guardianship. Diane Armstrong, PhD, testifying before the Senate Special Committee on Aging, wrote:

“Most of these [guardianship] Petitions are filed by adult children seeking some form of control over the personal and / or financial affairs of their elderly relative. They are sibling battles rooted in questions of inheritance and control, often described as ‘thinly veiled pre-death wills contests’. Anyone turning 62 with coveted assets is at risk. As one forensic psychiatrist pointed out about these so-called protective procedures: “For every $ 100,000 in a given property, an attorney appears; for every $ 25,000, one family member appears; and if there is no money, then no one shows up ‘(quoted in Harold T. Nedd’s Fighting for the care of older parents, USA Today, July 30, 1998) “.

Equally disturbing is the fact that short GDPOAs are often ignored! The very document that most people rely on to reduce the chance of a court appointed guardian is often simply ignored by the probate court. Diane Armstrong testified before the Senate Special Committee on Aging that:

“When an older person is brought to court and forced to prove his competence, we soon see that the system is broken. We have a system riddled with court-sanctioned elder abuse. Why? protections that have been put in place in the codes. It happens every day. Judges ignore durable powers of attorney – the most important document each of us can create to determine our care should we become incapacitated … Judges ignore our lists of shortlisted alternate decision makers. The current system does not work.

Consequently, GDPOAs do not provide complete protection against guardianship. In particular, if a person foresees the need for such protection due to the size or composition of their estate, or due to the composition of their family, or due to a lack of unity in their family, they should consult with an estate planning attorney. . familiar with trusts designed to maintain and maintain control of assets and decision-making outside of court participation or control. Such trust planning, as part of a comprehensive estate plan, can offer a more comprehensive solution than a GDPOA and a last will and testament.

Regardless, there are some strategies that can help increase the chances that an individual or institution will accept a GDPOA. First, have the succession plan reviewed annually and periodically rerun the GDPOA. Second, provide institutions with copies of the GDPOA before any illness. Request a letter from the institution acknowledging receipt of the GDPOA and the result of its review. With a letter from the institution that the GDPOA document will be accepted, there is a greater chance that the GDPOA will be accepted in the future. At a minimum, there is always the hope that the person providing the letter is still at the institution when the GDPOA is used.

Third, run the institution’s proprietary GDPOA. Some banks and brokerages require clients to sign their own power of attorney form to allow others to handle client accounts. There is generally nothing wrong with these brief powers of attorney as long as they do not revoke, but simply improve, the provisions of the GDPOA. If you have any questions or concerns, just get a copy and have an estate planning attorney review it. Finally, add agent names to all accounts as “agent” or “proxy” before illness occurs. Consequently, asset titling does not grant property rights to agents, but increases the chances that the GDPOA will be accepted without reservation when necessary.

But perhaps the best strategy for planning incompetence, incapacity, and disability is a comprehensive estate plan that includes a trust.

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