15 Jul All Powers Of Attorney Are Not The Same
When a person is mentally incapacitated, it is important to have a power of attorney already in place in order to take care of his or her affairs. There are many tasks, such as banking, bill paying, and creating other legal documents, that have to be completed. However, all powers of attorney are not the same. Some may contain the powers that are needed to solve a particular problem, while other powers of attorney may not. This article will discuss the different types of powers of attorney and provisions to examine when reviewing an existing power of attorney.
Powers of attorney can be described as general or limited. A general power of attorney can be drafted to contain whatever powers a person (the “principal”) wants to give someone (the agent), but will only be effective while the principal is mentally competent. Once the principal is no longer mentally competent to make decisions, the power of attorney lapses, and the agent loses his or her ability to act on behalf of the principal. A limited power of attorney is similar to a general power of attorney but limits the agent’s authority to one or more specific tasks, such as a real estate closing or an application for public benefits. A durable power of attorney survives the principal’s incapacity and is the document of choice for aging clients by estate planning, tax and elder law attorneys. A durable power of attorney can be general or limited.
The scope and purpose of a particular durable power of attorney will determine how it is drafted by the attorney. A power of attorney drafted by an estate planning or tax attorney typically limits gifts to the agent. Limiting gifts helps avoid the principal’s estate being included in the agent’s estate for federal estate tax purposes, if the agent predeceases the principal. This may be the result if the Internal Revenue Service determines that the agent had a General Power of Appointment over the principal’s property. Elder law attorneys tend not to limit gifts to the agent in a durable power of attorney. The principal’s estate, in most cases, is not very large. Public benefits planning is the driving factor, not estate taxes. In addition, elder law attorneys typically include Medicaid, Veterans Benefits, and other planning options favoring public benefits in the powers of attorney they draft. This is especially important when government agencies or financial institutions are looking at the power of attorney to determine the agent’s specific authority to perform a particular act.
The most important provisions to be aware of are the “Super Powers.” On October 1, 2011, Chapter 709 Part II of the Florida Statutes was amended as “The Florida Power of Attorney Act.” Section 709.2202 states that to be valid certain powers must be signed or initialed by the principal next to each separate enumeration of authority. These powers are referred to as the “Super Powers.” Two of these Super Powers can be very significant in Medicaid cases. They are provisions for gifting and creating inter vivos trusts. Gifting is used in 5-year trust planning or half-a-loaf Medicaid planning, and inter vivos trusts are used in 5-year trust planning and creating Qualified Income Trusts. If a durable power of attorney is created after October 1, 2011, and does not contain separately enumerated powers to make gifts or create inter vivos trusts which are initialed or signed, a guardianship may be needed to accomplish these tasks. This can add substantially to the cost of Medicaid Planning and further delay the application process. In a worst possible scenario, the judge may not approve the proposed Medicaid planning.
Health care providers should review all powers of attorney for potential public benefit applicants. The providers should determine if the document is a durable power of attorney and, if drafted after October 2, 2011, contains specifically enumerated Super Powers which have been signed or initialed. If the health care provider knows an elder law attorney, the attorney should review the document to ensure that the right Super Powers are included in the document and that they are drafted correctly. If the power of attorney is deficient and the patient is mentally competent enough to sign a new durable power of attorney, then a new document should be drafted immediately before the opportunity is lost.
In conclusion, not all powers of attorney are the same, and each one should be reviewed to determine if it will be good enough for estate and public benefits planning. Additionally, limited powers of attorney, while properly drafted, may not contain all of the powers needed for the desired type of planning. If assistance is needed to review a power of attorney, an individual should contact an elder law attorney for advice.