You’ve Got the Power with a Power of Attorney

Indiana Elder Law Planning: Power of Attorney versus Guardianship – You can pay now (and pay less) or you can pay later (with more cost and time required)

In this rapidly changing world, many people find – too late – that a doctor or a bank requires legally appointed authority to act. A person can use a Power of Attorney in advance. If it is “too late,” then Guardianship may be required.

To paraphrase an Fram Oil Filter commercial – You can pay me now or you can pay me later. The ad inferred preventative maintenance was less expensive and done on your schedule. The break-down caused by not keeping your transmission maintained costs more and comes an inopportune times.

In Elder Law Planning, it is important to do the preventative maintenance. A good Elder Law plan puts the documentation in place before the break-down occurs, which could result in an incapacity that no longer allows preventative planning.

Estate Planning Power of Attorney Can Save Time and Frustration

What Should Be Included

Your Estate or Elder Law Plan should include proper powers of attorney, key pre-authorized medical information release, advanced medical directives, as well as guidance and directions to the appointed decision-makers. (See 5 Essential Documents – 5 Essential Questions in Planning). A Power of Attorney allows you to appoint the person or persons with the legal authority to act on your behalf. You appoint an agent or attorney-in-fact to act on your behalf to make decisions in two areas: Financial and Medical. This article focuses on the Financial Power of Attorney, often called a “Durable Power of Attorney.”

What Does a Power of Attorney Do

Many times, people tell me they need a Will. However, A durable power of attorney is an essential tool in your estate plan that is not as well known. Very often, I believe this Power of Attorney is more important than a Will.

You execute this crucial
document to allow a person to act in for you for
financial purposes. Sometimes, the term “Principal” is used to describe you if you sign the Power of Attorney to appoint someone. That person is your “Agent” or “Attorney-in-Fact.” Your agent acts for you if you ever become incapacitated due to dementia or
some other reason. The agent under the power of attorney can quickly step
in and take care of your affairs. Some Powers of Attorney allow the agent to act before the principal is incapacitate, but needs help.

However, to execute a power of attorney, you need be able to sign the document – physically and mentally. Unfortunately, many people put-off completing this vital estate planning step until they no longer are legally capable.

What happens if I do not have a Power of Attorney?

If you do not have a legally appointed agent via a Power of Attorney, then the only legal option is Guardianship and, in some cases, Conservatorship. It is important to know, once you lose the capacity to legally sign a Power of Attorney, a court must intervene to appoint a conservator or guardian. Moreover, any time you engage a court, it requires time and expense. In addition, the court may not appoint the person that you prefer to be in charge.

Recently, I have been involved in guardianships which took more than a week to have a temporary guardianship appointed. It took the rest of the month to have the permanent guardianship appointed. The expense for attorney’s fees and court filings topped $3,000. Additionally, a court-required bond cost another $1,500. Depending upon the circumstances and judicial decision, the representative may have to seek court permission to take planning steps that he or she could have implemented immediately under a simple durable power of attorney.

Guardianship and Conservatorship

For clarification, a Guardianship is appointed “over the body” or to take care of the person. In Indiana, a Conservatorship can be appointed if the court decides it is in the best interest of the person to have a separate party “over the estate” or the assets the person owns. There is no set amount that triggers the separation. Hence, another reason to not leave it up to the courts, but to instead to take care of it as part of a proactive Estate or Elder Law plan.

To help you understand, the standard of capacity with respect to durable powers of attorney requires the “Principal” to clearly understand what she is signing, to whom the authority is being appointed, and the powers that are being appointed. This falls below the necessary capacity to sign a contract, but is higher than the capacity to commit to marriage.

If you do not have someone you trust to appoint as your agent, it may be more appropriate to have the probate court looking over the shoulder of the person who is handling your affairs through a guardianship or conservatorship. In that case, you may execute a limited durable power of attorney that simply nominates the person you want to serve as your conservator or guardian. Most states require the court to respect your nomination “except for good cause or disqualification.”

Be Careful with DIY

Sometimes, people think they can do legal documents via pre-printed packages or online resources. However, be wary of the legal capacity that a person must have to sign legal documents. You could be found running aground of the law if you try to execute documents for a person not legally capable of signing them. If someone challenges their validity later, you could be held liable for damages.

Even though you may be trying to help, be wary of your expose to this liability. It may seem self-serving for an attorney website to tell you to consider an attorney. However, engaging an attorney at the beginning could save you time, expense, and headaches later.

If you want to discuss your situation, you can sign-up for a complimentary thirty (30) minute consultation. This will help you to better understand rules and options. Complete the form to the right or call (219) 200-3902 to schedule a time.

Remember, you may pay a lower, preventative amount now, or a substantial amount later. Please call today.