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THE DURABLE POWER OF ATTORNEY
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ESSENTIAL PROTECTION FOR
YOU AND YOUR FAMILY
By Martin H. Cohen, Esq.
The prospect of becoming incompetent and no longer able to make decisions
and care for one’s self is extremely troubling. Yet, most people focus on
planning for the distribution of their assets on death rather than planning
for long-term incapacity. As you may have already observed, long-term
incapacity can be even more devastating than death, both emotionally and
financially.
An essential tool for dealing with incapacity is the Durable Power of
Attorney (also referred to in this article as “DPOA”). In this document, you
(the “principal”) give someone you trust (referred to as your “agent” or
“attorney-in-fact”) the legal authority and power to act on your behalf.
While all states permit you to make a DPOA, the rules will vary somewhat
from state to state. This article is based upon Florida law and is intended
to provide general information.
Here are some essential things that you should know about durable powers of
attorney:
1. When does the Durable Power of Attorney become effective and when does
it terminate? Powers of attorney become effective immediately and
terminate upon revocation or upon the death of the principal. Since 1974,
Durable Powers of Attorney remain in effect even if you become
incapacitated. They are referred to as “durable” because they endure during
incapacity.
Before the law authorizing DPOA’s, powers of attorney had little value
because they became ineffective when your family needed them the most, i.e.,
when you became incapacitated. Unless your assets were managed in a living
trust, your family would usually need a court appointed guardian of the
person and property to deal with your incapacity.
2. What if I do not want the DPOA to be effective immediately? In
Florida, the authority to act under a DPOA may be conditioned upon the lack
of capacity to manage property. This type is known as a "Springing Durable
Power of Attorney". Although an attractive concept, the Springing DPOA is
not widely used. Sometimes an individual who is uncomfortable with the DPOA
being immediately effective will place it in escrow with his attorney. The
DPOA is then released to the agent only upon proof that the individual is
incapacitated.
3. Will banks and brokerages accept the DPOA? Florida law has simplified the
process of dealing with banks, brokerages and other third parties.
Traditionally, banks have been reluctant to accept DPOA’s. Banks feared
lawsuits by account holders based upon the release of funds on the signature
of an agent who no longer had authority. Florida law protects banks from
being sued in such cases, provided they follow certain rules. To add teeth
to requests for banks and other third parties to accept DPOA’s, your agent
can recover attorney's fees and court costs if he or she must sue a bank
that refuses to accept your agent’s authority.
4. What happens to your account if your agent takes money after the DPOA
has been revoked? If the bank acts in good faith on the authority
granted to the agent under the DPOA, the principal (you) will suffer the
loss. Therefore, if you ever need to revoke a DPOA, it must be handled by an
attorney who will instruct you on how to revoke it and how to give notice to
anyone who might inadvertently rely upon it. Of course, the agent, would be
liable to the principal for anything that he or she might do without
authority.
5. What types of things will my agent be able to do for me? You can
limit the authority granted in the Durable Power of Attorney to particular
acts, like selling your house. Alternatively it is usually broader in scope,
allowing your agent to sign checks, pay bills, and deal with the IRS.
6. Can a DPOA be used for tax planning and Medicaid planning?
Absolutely yes, but few people need estate tax planning, and commonly
drafted estate tax planning provisions in your DPOA may prevent your agent
from doing Medicaid Planning. Elder Law Attorneys preserve your ability to
do Medicaid Planning. They draft DPOA’s with tax planning clauses that do
not conflict with your ability to preserve your assets when faced with the
need for nursing home care.
7. What will happen if my agent cannot do Medicaid Planning for me?
To ensure that your agent has the authority necessary to establish Medicaid
eligibility, you must also give him the power to modify trusts and make
gifts, as well as other specific powers that will protect you if you need
nursing home care. These clauses are very complex and must be carefully
drafted to comply with federal and state law. Absent these powers, your
family may be forced to make the choice between spending all of your assets
on nursing home care or having a guardian appointed who will ask the Court
for permission to do Medicaid Planning.
8. Why does the DPOA have to be so long and detailed? Florida case
law has strictly construed the language in DPOA’s. Therefore, unless the
DPOA specifically authorizes a particular act, the agent will not have
authority to perform it.
9. Are there any limitations on what I can authorize my agent to do?
Yes. Among other things, he or she cannot perform fiduciary acts, vote for
you in an election , or change your will.
10. Who can serve as my attorney in fact? The first DPOA law limited
those who could serve to the principal's spouse, parent or child.
Eventually, these restrictions were removed. Today, any adult and most
financial institutions with trust powers are permitted to serve.
11. How do laws regarding DPOA’s affect snow-birds? If you spend a
significant amount of time in more than one state, you should consult with
lawyers in each state to be sure that your documents will be enforceable
wherever they are needed. Sometimes it is best to execute documents in both
states. I regularly consult with lawyers in other states to ensure that our
mutual clients are properly protected.
The Durable Power of Attorney is a private and relatively inexpensive way to
protect your finances and dignity in the event of incapacity or
incompetency. Never rely on forms that you may find in office supply stores,
books or on the Internet. They will rarely, if ever, provide the protections
that you need most and could cost you tens or even hundreds of thousands of
dollars. If you do not have a Durable Power of Attorney, or if yours was not
prepared and executed properly, your family may have to hire a lawyer to
petition the probate court for appointment of a guardian to handle your
affairs. This process, in which the senior is declared legally incompetent,
is lengthy, expensive and humiliating.
If you have questions
about anything on this website, or if you wish to schedule an appointment,
contact Mr. Cohen at (954) 315-0355 or by
E-mail.
Mr. Cohen maintains offices
for the practice of Estate Planning, Elder Law and Disability Law in
Plantation ,
Fort Lauderdale and
Pembroke Pines for the convenience of his clients throughout
Broward County, Florida. Maps to the offices are available by following
these links.
For those of you who are
unfamiliar with South Florida geography, Broward County has 30
municipalities, including:
Coconut Creek,
Cooper City,
Coral Springs,
Dania Beach,
Davie,
Deerfield Beach,
Fort Lauderdale,
(Ft. Lauderdale),
Hallandale Beach,
Hillsboro Beach,
Hollywood,
Lauderhill,
Lauderdale Lakes,
Lauderdale-By-The-Sea, Lazy Lake,
Lighthouse Point,
Margate,
Miramar,
North Lauderdale,
Oakland Park,
Parkland,
Pembroke Park,
Pembroke Pines,
Plantation,
Pompano Beach,
Sea Ranch Lakes,
Southwest Ranches,
Sunrise,
Tamarac,
Weston,
Wilton Manors.
For information on these
cities, click on the appropriate link.
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