I advise Minnesotans to get their foundational estate plans in order – young, old, married, single, with kids and without – it’s important. For most people, making some sort of transfer of asset plan for after death (wills and/or trusts) is only the beginning. It should continue with life planning as well, meaning powers of attorney (POA) and health care directives (HCD). When I talk to my clients about these last two documents, I refer to them as “plus one” documents. I have noticed it makes it easier to understand how the documents work and how they can help.
The Principal + the Agent = 2 persons with authority (the principal can still make decisions for him/herself).
POWERS OF ATTORNEY: For a Statutory Short-Form Power of Attorney (SSFPOA), which is used by a client-appointed agent to make financial decisions/transactions, it’s fairly straight-forward. It does not give the client an option for “springing” authority. Instead, it offers an expiration date, should you choose to use one. Once the client (the Principal) signs, dates, and has it notarized, the Principal’s designated party (the Attorney-in-Fact) can step in without the Principal’s knowledge, and without the Principal’s permission. This often makes clients nervous, and we discuss options to protect their documents to avoid their Attorney(s)-in-Fact from using them without serious consideration. But, the help this can provide without requiring more intrusive steps can be invaluable to those you’ve authorized to assist you. Here’s where the “plus one” concept is important.
When you as the Principal designate someone as your Attorney-in-Fact, your authority does not change. You still have all the authorities you’ve always had as owner of, for example, a bank account. The POA allows someone else to have the same powers you have. If you designated a trusted person, who is trustworthy and understands their legal duties to you, there are now two people who can make decisions on this account, not just you. The Principal’s powers are not taken away. They are enhanced by allowing someone else the ability to check on things, ask questions, double-check, fix problems and misunderstandings you may have inadvertently created. If your health is slowly declining, imagine the safety net this might provide….And, if your health precipitously declines, your agent will be able to step in and go to work managing things until you’re on your feet again.
For a General Durable Power of Attorney (GDPOA), you may choose to make it “springing” and, to provide extra clarity, I customarily add the manner in which the client is determined to be incapacitated. In short, the GDPOA is more pliable and able to be customized, but may be harder to use. A SSFPOA is likely easier to use, but has limitations in its customizations. Harder/Easier to use refers to those individuals and/or institutions that recognize the documents you are presenting.
if you’ve executed a Power of Attorney and your attorney drafted it so that it requires your inability to make decisions before it becomes valid, it is a “springing” POA. It “springs” into action upon your inability to speak for yourself and make your own decisions. In many circumstances, I encourage a non-springing Power of Attorney because I know how often someone needs help before they realize it (or come to terms with it) themselves. Often, the Powers of Attorney I draft for my clients become valid upon their signing the document – even when the client doesn’t need help yet. This is a safety measure to avoid the need to prove incapacity before the client’s agent(s) can step in, and/or require the next solution, which would likely be a court-appointed Conservatorship.
If the Principal keeps their authority but is unable to manage things well, they can cause very serious financial issues for themselves. Sometimes, the Principal’s authorities and actions cause issues the Attorney-in-Fact can’t fix. Conservatorship, opposite of a “plus one” authority, is using the Court’s authority to take your decision-making power away and give it to someone else (the Conservator), who will exercise the authority on your behalf. Clearly, this proceeding is only for when it is absolutely necessary, and is rarely a preferred choice.
“Springing” authority may be, in some instances, a different kind of safety measure. But, assuming the client considers the safeties I have described above, an immediately valid Power of Attorney may be the best choice. Each person should consider the safety measures they feel they need in consultation with their attorney.
HEALTH CARE DIRECTIVES: The same benefits apply to Health Care Directives (HCD) but unless you proactively authorize your agent to speak for you even when you can make your own decisions, your agent will not be authorized to speak for you – the “springing” power is always in place for a HCD. This is because we individually have a constitutional right to make our own health care decisions. If you are competent to do so, the health care providers only want to know what you want. But, the HCD is ready when and if you need it. If you fail to make this document, then the only option left is a court-appointed Guardian, who will make decisions instead you.
Below is an example that may help illustrate the importance of these documents.
Cara’s dad assigned her authority to help him with his finances and health care decisions when he made Cara his Attorney-in-Fact with a Power of Attorney, and his agent with a Health Care Directive. His health has declined over the last few years, and his ability to keep track of complex facts and figures is compromised – he knows it. And, so does Cara. They talk and decide “it’s time” for a little assistance once in awhile. All goes well for a few years. Cara steps in as needed and keeps an eye on dad when she can. Then, she starts noticing dad’s checkbook is a little disorganized. He’s forgotten to write down amounts and dates, he seems to be withdrawing large sums of cash from his bank accounts and then forgetting where it is or if he even still has it(!) He’s forgetting to eat meals and seems unable to remember if he’s taken his medication for the day. And, he’s taken to taking long walks and getting lost – in very unsafe situations. But, he doesn’t want to move out of his apartment, and he doesn’t want to take his medication for a life-threatening condition because it makes him drowsy. Cara has the documents she needs to step in, but as long as dad can still live alone, he’ll continue to make decisions, too – wandering and getting lost, taking out large withdrawals of his limited resources, and making poor choices for his health and safety. As long as she can continue to supervise his choices, this could continue to work well. The two documents she’s got, however, won’t stop dad from making dangerous decisions for himself. She’ll need to decide when his bad decisions overwhelm her abilities to fix them for him.
So, when is a POA or HCD not enough? Answer: When two people having the authority to make decisions is one too many (meaning, one person of the two is no longer able to realistically exercise good judgement on behalf of their person or their property). You will likely know when it is time to exercise this very difficult decision for Guardianship and/or Conservatorship. But, even if you’re not sure, this is the point at which an attorney can assist you with the petition, with your interaction with the court, and making sure you’ve thought through all the alternatives and understand your duties and expectations.
This blog is written by Bridget-Michaele Reischl, Attorney DECORO LAW OFFICE, PLLC tmw.157.myftpupload.com/