Caring for a Loved One - Guardianship, Powers of Attorney and Medical Directives

Holiday gatherings are often a time for us to gather with relatives and friends. The bustle of activity can highlight the impact that aging has had on our loved ones in the passing year. Observing decline in the people we care about can be unsettling and may generate many questions about how to best care for their needs. 

Creating a plan for dealing with problems before they develop, and putting a financial power of attorney and a healthcare power of attorney in place while your loved one is still competent can prevent a lot of misunderstanding, heartache and expense. If a loved one is already at a point where he or she is unable to care for and make good decisions for themselves, and if they are no longer competent to prepare financial and health care powers of attorney, Guardianship is the legal process that you must go through to be able to make decisions for them. 

Without guardianship or comprehensive powers of attorney, you will generally not be able to legally: 

1.  Authorize their admission or discharge from a hospital or nursing home;
2.  Hire and fire their doctors or authorize medical treatment; or 
3.  Use their assets to pay for their expenses and care 

There are two different types of guardianship in New Jersey, the Guardianship of the Person and the Guardianship of the Estate, both of which require court appointment. The same person may serve as both types of guardian and are frequently referred to as Guardianship of the Person and Property. 

Guardianship of the Person allows you to make decisions about where an incapacitated person will live, which doctors will attend to their health, and how their medical conditions will be treated. Guardianship of the Estate allows you to manage the assets and financial affairs of the incapacitated person. In many cases, this means that the primary responsibility of the Guardian of the Estate is to figure out how to best use their loved one’s financial assets to provide care for them for as long as they are in need of it. 

To be appointed as a guardian, you must be able to prove to the court that a person is incapacitated, or unable to govern themselves or manage their affairs. In practice, this means that a person must be unable to make generally rational decisions about their medical care, personal care or finances. The incapacity may be caused by physical illness, mental disability, or chronic use of drugs or alcohol. For example, many of the individuals who seek guardianship are the parents of special needs children who have recently turned eighteen. 

If a person is able to perform some but not all of the tasks necessary to care for himself the guardianship may be limited to the areas where help is most clearly needed. As guardianship is such a powerful appointment, a court will not order it unless it is necessary. A critical part of the procedure to assess the need for a guardian is to require affidavits from two professionals (routinely physicians or psychiatrists) confirming the person’s mental and physical condition. 

You must also provide detailed information about your request to the incapacitated person and their next of kin (frequently their spouse and children, but this could also include their parents, grandparents, siblings, nieces, nephews or grandchildren depending on the situation). These individuals will then also have a chance to participate in the court process and present evidence that may either support or detract from your case. 

The allegedly incapacitated person will also have a person (usually an attorney) appointed on their behalf to help ensure that their voice is heard during the court proceedings and to assist them with resisting the guardianship if that is their desire. If guardianship is awarded, a person seeking guardianship must agree to be a fiduciary of the incapacitated person, which means that they must do what is in the best interests of their ward, even if it conflicts with their own personal interests. 

To help confirm that guardians are honoring that commitment, they must submit an annual report to the Court providing details about how the incapacitated person is doing and how their money has been spent.

Guardianship carries with it a lot of responsibility. Speaking with an estate planning attorney who routinely practices in this area of the law can help you determine if guardianship is worth pursuing and how to accomplish it in a way that will be minimally disruptive for you and your loved one.

Written by: Jessica J. Sauer, Esq. and Kevin A. Pollock, Esq., LL.M.

 “To care for those who once cared for us is one of the highest honors.”-Tia Walker

Trouble with Banks Accepting a Power of Attorney - Florida

As I've written in my last two posts, more and more Banks have been routinely rejecting Power of Attorney forms drafted by attorneys in New Jersey.  Obviously this irks me enough to write about it in three consecutive posts.

Apparently, this practice is not as common in Florida, and banks do so at their own peril after a Florida Court of Appeals awarded attorney fees against an insurance company for refusing to accept a person's power of attorney in Albelo v. Southern Oak Insurance Co.  This is because under Florida Statute 709.2120, no third party can unreasonably reject a valid power of attorney.

For a nice summary of the topic, please see David M. Goldman, Esq.'s post in his Florida Estate Planning Lawyer Blog.

Banks Required to Accept a Power of Attorney Under NJ Statutory Law

Yesterday I wrote a post about how banks are routinely refusing to accept powers of attorney.  I thought this statute may be helpful to people who may need to argue with the banks (at least in NJ anyway):

N.J.S.A 46:2B-13.    Banking institutions to accept power of attorney      4.   With respect to banking transactions, banking institutions shall accept and rely on a power of attorney which conforms to this act and shall permit the agent to act and exercise the authority set forth in this act, provided that: 

   a.   The banking institution shall refuse to rely on or act pursuant to a power of attorney if (1) the signature of the principal is not genuine, or (2) the employee of the banking institution who receives, or is required to act on, the power of attorney has received actual notice of the death of the principal, of the revocation of the power of attorney or of the disability of the principal at the time of the execution of the power of attorney; 

   b.   The banking institution is not obligated to rely on or act pursuant to the power of attorney if it believes in good faith that the power of attorney does not appear to be genuine, that the principal is dead, that the power of attorney has been revoked or that the principal was under a disability at the time of the execution of the power of attorney.  The banking institution shall have a reasonable time under the circumstances within which to decide whether it will rely on or act pursuant to a power of attorney presented to it, but it may refuse to act or rely upon a power of attorney first presented to it more than 10 years after its date or on which it has not acted for a 10-year period unless the agent is either the spouse, parent or a descendant of a parent of the principal; 

   c.   If the power of attorney provides that it "shall become effective upon the disability of the principal" or similar words, the banking institution is not obligated to rely on or act pursuant to the power of attorney unless the banking institution is provided by the agent with proof to its satisfaction that the principal is then under a disability as provided in the power of attorney; 

   d.   If the agent seeks to withdraw or pay funds from an account of the principal, the agent shall provide evidence satisfactory to the banking institution of his identity and shall execute a signature card in a form as required by the banking institution; 

   e.   If the banking institution refuses to rely on or act pursuant to a power of attorney and the agent or principal has, in writing, provided the banking institution with an address of the agent, the institution shall notify the agent by a writing addressed to the address provided to it that the power of attorney has been rejected and the reason for the rejection; 

   f.   The banking institution has viewed a form of power of attorney which contains an actual original signature of the principal. Alternatively, if the banking institution receives an affidavit of the agent that such an original is not available to be presented, the banking institution may accept a photocopy of the power of attorney certified to be a true copy of the original by either (1) another banking institution or (2) the county recording office of the county in which the original was recorded. 

   L.1991,c.95,s.4; amended 1994,c.142,s.2.   46:2B-14.    Banking institutions not liable for action in reliance on power of attorney       No banking institution acting in reliance on a power of attorney as set forth in this act, nor any person acting on behalf of such an institution, shall be held liable for injury for any act or omission if it is performed in good faith and within the scope of the institution's or person's duties, unless the act or omission constitutes a crime, actual fraud, actual malice or willful misconduct.  

Growing Problem of Banks refusing to Honor a Financial Power of Attorney

Please be advised that more and more banks are refusing to accept any financial power of attorney other than their own form.  This may not be a huge problem if you are still competent, but if you become incapacitated later and have not sign the "Bank approved form", it could make life very difficult for your agent to act on your behalf.

I recently ran in to this problem with a client and it took a long time to straighten out.  Also, I just came across this excellent article in the New York Times written by Paula Span on the topic. I strongly suggest reading it as it details how widespread the problem is and offers some helpful solutions.

I do note that, to date, the banks have tended to back down if you approach the managers and legal department.   Unfortunately, hiring an attorney to fight that fight may cost the client a fair amount in legal fees.  Another approach, if you are politically connected, is to get your ombudsman involved.

As a result of these news, I tend to be advocating Revocable Living Trusts even more.  Unfortunately, that won't help if the client has an IRA or other retirement account.  I'm interested in hearing how others are dealing with this problem.

Change in Pennsylvania Power of Attorney Law

Happy New Year!  Effective January 1, 2015, under Act 95, Pennsylvania modified Chapter 56 of Title 20 of the Pennsylvania Consolidated Statutes, which deals with Powers of Attorney.  The amendment was made to try to better protect the Grantor of the powers.

Under the new statute, a Pennsylvania Power of Attorney must be witnessed by two witnesses and a notary to be valid.  Also, the warning statement that the Grantor must sign at the beginning of the Power of Attorney was also modified slightly so that the Grantor better acknowledges the power he or she is potentially giving to the Agent.

The new law also creates some mandatory duties on the Agent that the principal cannot waive or modify. These three requirements are that the agent must: (1) act in accordance with the principal’s reasonable expectations to the extent actually known by the agent, and otherwise in the principal’s best interests; (2) act in good faith; and (3) act only within the scope of authority granted in the power of attorney.

Furthermore, under the new law, unless the document says otherwise, an Agent must also:

(1)  Keep his funds separate from the principal’s funds unless: 

    (i)  the funds were not kept separate as of the date of the execution of the power of attorney; or 

    (ii) the principal commingles the funds after the date of the execution of the power of attorney and the agent is the principal’s spouse.

(2)  Act so as not to create a conflict of interest that impairs the agent’s ability to act impartially in the principal’s best interest.

(3)  Act with the care, competence and diligence ordinarily exercised by agents in similar circumstances.

(4)  Keep a record of all receipts, disbursements and transactions made on behalf of the principal.

(5)  Cooperate with a person who has authority to make health care decisions for the principal to carry out the principal’s reasonable expectations to the extent actually known by the agent and, otherwise, act in the principal’s best interest.

(6)  Attempt to preserve the principal’s estate plan, to the extent actually known by the agent, if preserving the plan is consistent with the principal’s best interest based on all relevant factors, including:

    (i)    The value and nature of the principal’s property.

    (ii)   The principal’s foreseeable obligations and need for maintenance.

    (iii)  Minimization of taxes, including income, estate, inheritance, generation-skipping transfer and gift taxes.

Finally, Section 5601.4(a) limits the power of an agent to take certain actions unless the authority is expressly granted in the POA and is not prohibited by another instrument. The major powers and actions that must be specifically authorized are:  

(1)  Create, amend, revoke or terminate an inter vivos trust other than as permitted under section 5602(a)(2), (3) and (7) (relating to form of power of attorney).

(2)  Make a gift.

(3)  Create or change rights of survivorship.

(4)  Create or change a beneficiary designation.

(5)  Delegate authority granted under the power of attorney.

(6)  Waive the principal’s right to be a beneficiary of a joint and survivor annuity, including a survivor benefit under a retirement plan.

(7)  Exercise fiduciary powers that the principal has authority to delegate.

(8)  Disclaim property, including a power of appointment.

Section 5601.4(b) further limits the exercise of hot power authority by agents who are not in certain family relationship with the principal. However, a Power of Attorney can be written to specifically opt out of these limitations.

Using Revocable Trusts to Prevent Elder Fraud

There are many schools of thoughts on the use of Revocable Trusts, also know as Living Trusts or Grantor Trusts. Some attorneys love them as a way to avoid probate; others, including myself, are more hesitant to recommend them. My hesitancy in using them stems from the fact that in New Jersey probate is usually not that difficult or expensive. (I always recommend them for my clients with property in Florida, New York or in multiple states.)

I also find that many attorneys create Revocable Trusts, but do not help their clients fund them. Unless these trusts are fully funded BEFORE you die, you have to go through probate anyway. This can double or triple the costs involved because you pay more on the front end AND when you die.

Despite my general reluctance in setting up Revocable Trusts, I can offer another good reason for setting one up - to prevent Elder Fraud. You probably see stories all the time about how a carekeeper, neighbor or other stranger is hired to look after an elderly person and then unwittingly gives away thousands of dollars for reasons that they can no longer recall.

In a worst case scenario, the elderly individuals become convinced that their children have abandoned them and change their estate planning documents to cut out their children. Occasionally, the bad caretaker, neighbor or stranger also becomes the new Power of Attorney and proceeds to spend all of the elderly person's assets.

A way to prevent these events from happening is to create a Revocable Trust naming a trusted relative as Trustee (or as co-Trustee with the elderly individual). With a trusted relative named as Trustee or co-Trustee, money cannot be spent or given away without the trusted relative knowing about it. Moreover, the trust cannot be modified without the trusted relative becoming aware of the situation.

Even without naming a trusted relative as Trustee or co-Trustee the trust can be structured to make it more difficult to modify to change than a Will or a Power of Attorney. For example, you can have a provision in the Revocable Trust that requires certain individuals to be notified before any modifications are made. That is not the case with a Will or Power of Attorney, which can be changed on a whim and without any notice requirements.

Another way a Revocable Trust can prevent Elder Fraud is because it is just more cumbersome to deal with. So, while many attorneys, and non-attorneys, feel that they can write a Will or Power of Attorney, far fewer people want to mess with a Revocable Trust. Sometimes, there is no better way to stop a thief than to make them have to jump through some legal hoops.

Checking in with Your Relatives

I was talking to an elder care coach that I know by the name of Thomas P. Callahan, of A.F.I. Coaching and Consulting, and we started talking about our holiday plans. One interesting item that came up was how busy he tends to get right after the holidays. During this time of year, children return home to visit their elderly parents and become fully aware of how their parents have deteriorated over the course of the year.

If you are visiting home for the first time in a while, here are some warning signs that you should look out for if you are concerned about a loved one:

1. If they are hoarding items (Such as numerous cereal boxes or sugar packets);
   
2. If they have many unpaid bills;
   
3. If they are becoming paranoid;
   
4. If they having memory issues (do they repeat stories or fail to notice items right in front of them);
   
5. If they have substantial weight loss or weight gain;
   
6. If they are eating out a lot;
   
7. If they are relying on untrustworthy companions (are they isolated from their normal friends and neighbors);
   
8. If their car starts to have more dings and dents;
   
9. If the laundry is not being cleaned;
   
10. If they are sleeping on the couch or recliner instead of the bed; or
    
11. If they are watching much more television than they used to.

According to Tom, these traits often go unnoticed because people view their parents as always capable…after all, they are your parents. They are the people you turned to as a child if you fell down.

It is important not to get frustrated when these things start to happen. That leads to unnecessary arguments. If you are seeing your parents exhibiting these traits, you must understand that your parents may not understand what is happening to them.

There are many creative ways to help, but letting things go on as they are is NOT a resolution. As a starting point, you will want to speak with an elder care coach. You will also want to make sure that you know where your parents Wills, Powers of Attorney and Advanced Health Care Directives are located. If they do not have any, you will want to encourage them to meet with an estate planning attorney before they are no longer have the ability to prepare such documents.

New Florida Power of Attorney Law

Effective October 1, 2011, a new law went into effect dramatically changing the Florida Power of Attorney Statute. A Power of Attorney is a writing in which one party grants authority to an agent to act in place of the principal; each act performed by the agent pursuant to the power of attorney has the same effect and benefit to the principal and the principal's successors in interest as if th principal had performed the act.

Important changes in the new Florida law include:

1. An individual can no longer make a springing power of attorney - a springing POA is a power of attorney that becomes effective in the event of disability or some future contingent event (there is an exception of military powers);


2. All Florida Powers of Attorney must be durable powers of attorney (i.e. they must be effective when signed);


3. A Grantor must specifically initial any provision that allows for:
   - gifting, changing beneficiary of a retirement account,
   - changing any benefiary of an annuity,
   - changing the ownership or beneficiary of a life insurance policy,
   - amending, modifying, creating, revoking or terminating a trust,
   - waiving the principal's right to be a beneficiary of a joint and survivor annuity, including surivor benefits under a retirement plan, or
   - disclaiming property and powers of appointment;


4. If multiple agents are named, absent explicit direction otherwise, each agent may act unilaterally. This changes the presumption, it used to be that if multiple agents were named, they had to act together; and


5. Third parties are required to accept a copy of the power of attorney (and not demand an original).

The new Power of Attorney Act also modifies and clarifies the duties of an agent. Specifically, the agent may not delegate authority to act as agent (except for investment functions), the agent must keep record of all receipts, disbursments and transactions made on behalf of the principal, and the agent may not act contrary to the principal's reasonable expectactions, including preserving the principal's estate plan.

The changes are not retro-active, so powers of attorney drafted before October 1, 2011 are still valid (including gifting provisions that are not initialed). However, to avoid confusion, it may be best to redo any older power of attorney forms you have.

New York Statutory Power of Attorney

If you recall, I wrote an article back in 2009 that the New York legislature changed the requirements for the New York Power of Attorney form.

Looking around online today I noticed that most of the free New York Statutory Power of Attorney forms that are available online are WRONG. They are either old forms or do not include the Major Gifts Rider. This includes the New York State Bar Association form which appears on many government web sites.

Do not forget, if you want to make Major Gifts (defined by New York as gifts in excess of $500 per person per year under NY GOB LAW Section 5-1502I(14)), you must complete the separate Major Gifts Rider. Additionally, although the NY Power of Attorney form does not require any witnesses, the Major Gift Rider does. Both must be notarized - so be careful out there.

Special Needs Planning in NJ - Part 3 of 4

ESTATE PLANNING FOR A SPECIAL NEEDS CHILD

In Part III of this Series, I want to discuss estate planning issues for parents of a special needs child.

A typical estate plan for parents without a special needs child includes:

1. Will;
2. Financial Power Of Attorney;
3. Health Care Power of Attorney;
4. Advanced Health Care Directive; and
5. Naming Beneficiaries of Retirement Plans.

The parent of a special needs child must also do everything possible to avoid giving money outright to the Special Needs Child. This includes arranging for care and financial resources for the Special Needs Child.

In order to do everything possible to avoid giving money outright to the Special Needs Child, there are certain steps that can be taken:

1) Setting up a special trust for the Special Needs Child that will not be counted against the child's income for purposes of eligibility for government programs;
2) Redoing beneficiary designation notices on life insurance contracts and retirement plans; and
3) Telling family members to either leave money to a special needs trust for the child or specifically exclude the Special Needs Child from their Wills.

There are also specific arrangements that need to be made to ensure that your special needs child is cared for after your passing. This includes:

1) Arranging for a guardian to be named for the Special Needs Child;
2) Arranging for government services (SSI, SSDI, Medicaid, etc.); and
3) Arranging for living arrangements for the child.

Parents of special needs children always have a lot to deal with, but much of this planning should be done shortly after you find out that you have a child with special needs. Most importantly, life insurance planning should be done as soon as possible. If you wait too long, you may no longer qualify for insurance - and special needs parents, more than most, need to guarantee that money will be there after they pass.

Change to New York Power of Attorney Form

On January 27th of this year, New York changed its law regarding the requirements necessary to have a valid financial power of attorney. Some the more important changes include:

1. Two people must now witness the Grantor's signature;
2. The agent must now sign the power of attorney and have his/her signature notarized;
3. If you want your agent to make gifts for tax planning (or any other purpose), you must execute a Major Gift Rider; and
4. You may now have an independent person act as a monitor for the agent.

These changes become effective September 1, 2009. (NOTE - Original bill noted an effective date of March 1.)

Thanks to the Wills, Trusts & Estates Professor Blog for bringing this to my attention. Thanks to Frank Farkas of the Jewish Association for the Aged for bringing the change of the effective date to my attention.

Get Thee a POA

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.