Don’t have a Power Of Attorney (“POA”) yet? You are not the only one. Millions of Americans find out too late that a POA is a very useful and inexpensive document to obtain. If you do not have a POA, in order for your spouse or loved ones to make financial and medical decisions for you, they must institute a guardianship proceeding.
A guardianship proceeding starts with the prospective guardian hiring an attorney and obtain at least two medical opinions about the alleged incompetent’s condition. The Court will appoint an independent attorney for the benefit of the alleged incompetent person, and that attorney must submit a report to the Court. Assuming there are no issues, the judge will hold a hearing and officially name a guardian.
Usually the judge will allow for attorneys fees, often about $10,000, and require the guardian to pay for an insurance bond. The fee for the bond depends upon the value of your assets, but it can cost several hundred dollars per year even for a small estate. (More than most attorneys charge for a POA.)
The whole process typically takes several months, which can delay important financial and medical decisions. Additionally, if anyone contests the guardianship, the costs will skyrocket and delay the proceeding.
Having a valid POA minimizes the hassles and cost of a guardianship proceeding. A POA is a legal document that allows others to act on your behalf when making financial and medical decisions. Your decision maker is known as your “attorney-in-fact”.
There are two kinds of POA. A traditional POA is only effective in the event of incapacity. A Durable POA is effective as soon as you sign it. Your choice of POA will be dependent upon your relationship with the attorney-in-fact. For example, you might exercise a Durable POA in favor of your spouse, but a traditional one in favor of a friend.
If you are planning to save some money and buy a POA from the internet or on CD, just remember, you get what you pay for. Some of the software is missing vital components. For example, it may not contain the requisite HIPPA language or the power to make gifts.
HIPPA language is important because of new laws regarding health care disclosure. Many doctors will not release your medical information without proper authorization, and your attorney-in-fact may still have to institute a guardianship proceeding.
The power to gift is essential if you wish to provide for your spouse or your heirs, particularly if you wish to engage in tax or Medicaid planning. Absent this power, your attorney-in-fact may only use your money for your benefit.
Remember, to save time, money and countless hours of aggravation, a POA must be in place BEFORE you become incapacitated.