The Durable Power of Attorney
Guest: Dennis Christensen – Elder Law Attorney
Host: Sally Smith – Author/Resource literature on age-related disease and healthy aging
Sally Smith: Welcome to Age to Age. I’m Sally Smith. Let’s talk. We have with us, again, Dennis Christensen, who is advising us on the important parts of elder law for aging people and families trying to plan. He’s talked about several very important documents. And one of the most important, I understand, is called a Durable Power of Attorney. We’ve talked about Healthcare Power of Attorney. We talked about living wills. We’ve talked about actual wills. What is a Durable Power of Attorney?
Dennis Christensen: A Durable Power of Attorney is a document that a person signs which gives permission to the person they’ve named to sign their name. So, if I named you as an agent under my durable power of attorney, that would give you authority to transact certain business and sign my name to certain transactions. So, the power of attorney identifies and lists all of the things that I’m authorized to take care of. For example, it will give me the authority to deal with your bank accounts. It will give me authority to buy and sell real estate that you might have. It will give me authority to deal with insurance issues. And, in almost any kind of situation where your signature is required, it gives me the authority to do those transactions.
If a person becomes ill and can’t make those decisions anymore, or can’t conduct those transactions, or can’t sign their name anymore, and say you have some stock that needs to be signed to pay your bills and you can’t sign because you’re sick, no one else has the authority to sign for you. What the power of attorney does is give someone that authority to sign your name for the things that you’ve given them authority for. If you don’t have a power of attorney and something comes up that requires your signature, the only way that signature can be obtained is going through the probate court and getting a conservator established.
Now, if we go through that process, we’re getting the government involved. We’re getting the court involved. There are some limits on the things that person can do. The cost of getting a conservatorship established is very expensive. So, what this does is give you the opportunity to choose the person that you want. If you go through a conservatorship, the court decides who gets to conduct your business. This way, you get to choose the person you want. Now, many times people say, well, does it have to be the oldest child? Traditionally, that may be true, but these days, a lot of times, it could be the youngest child. It may be someone other than your children, because you can name whoever you want to be the agent. They can conduct any business that you want so long as you’ve authorized them to do so.
Sally Smith: I was reading about how this was not universally followed. In other words, 50 years ago, or so, we weren’t hearing so much about durable powers of attorney. The husband took the wife in and said, I want to sign for her, or the children did that. In this article, they were saying sometimes, in small towns, if I knew you and you lived next door to your father, and he became infirm, you might be able to take him to the bank; they’d known you over a lifetime. Of course, patterns of living have changed so much that there isn’t that sense of knowledge and community, and longevity. And these things become so much more important because you don’t really know. Is this a prerequisite, this durable power of attorney? Should everybody in America have one of these?
Dennis Christensen: Yes. When people ask what the most important document that you need to have is, I tell them that they’re all important. But, relatively speaking, if you don’t have a will, for example, the state writes a will for you. If you don’t have a healthcare power of attorney or a living will, the state has provided a mechanism and a pecking order of people that could make medical decisions for you. But, for power of attorney, if you don’t have a power of attorney, you have to go into another process. There’s no place where they can just nominate you without going through a whole process.
So, a power of attorney is very important. It’s what allows someone you’ve chosen to make these financial decisions for you, and there’s no fallback. For example, if someone has a piece of property and needs to sell it, and they can’t sign anymore, a power of attorney allows someone to sign for them so they don’t have to go through the probate court system. Let’s say that a husband and wife own some property and the wife has Alzheimer’s, is going into a nursing home, and they need Medicaid to help pay for her medical care, a healthcare power of attorney, signed by the wife, would allow her interest in the property to be transferred to her husband so they don’t lose the house, as part of a state recovery of the Medicaid system.
What the power of attorney does is allow a person’s business to be conducted by the person they choose and thereby avoid the court system in taking care of their life. It allows them to control their own affairs rather than letting the court, or some judge, do that for them. One of the things about a power of attorney that’s very important is that most, that we see in our office, do not have a provision that allows for gifting. What that means is that if you’re unable to sign documents and you have a power of attorney, and that power of attorney doesn’t allow someone to make gifts, you can’t transfer your interest in your house to your spouse. No one can transfer money from a bank account to their spouse or children because our state’s Supreme Court has said unless a power of attorney has a gifting provision, you cannot use it to give away assets.
A power of attorney is a very powerful document. A person has the ability, if they’re not a trustworthy person, to abuse that power of attorney and use it for things other than taking care of you. So, when you’re deciding whether to execute a power of attorney or not, if you’re not sure, and you don’t feel very confident that this person that you give the authority to is going to act in your best interest, you’re better off not having them as your agent. This person, because of the authority given, has to be someone you trust with your assets. And if you don’t have complete trust in them, you’d probably better think about naming someone else.
Sally Smith: Question: with my mother-in-law, she had dementia, but she went in and out of dementia, which was quite interesting. She would be very clear and in great shape for a couple of days, and then she would say something very irrational and go through about a week-long period where she was not herself. And then she’d flip back into this better awareness state. I would assume, with a durable power of attorney, once it’s activated the first time, it would cover from then on. You don’t go in an out of using a durable power of attorney, do you?
Dennis Christensen: Well, there are actually two types of power of attorney. There’s what we call a springing power of attorney, and then what I just call a regular power of attorney. The regular power of attorney, when you sign it, you’ve named that agent to immediately have the authority to sign things for you. Even though you may be in perfect health, they technically have the ability, the next day, to use that power of attorney and deal with your assets. Some clients say, I don’t know if I want to do that. I’m afraid that, maybe, they’ll take money out of my bank account or sell my property. Well, if you have that concern about a person doing that when you’re healthy, that’s the wrong person to be naming as your agent under the power of attorney.
But when it becomes effective immediately, then you don’t have to worry about the situation that you’ve described, which is, are they able to make decisions today, or not? And every time they get to make a decision, or the agent has to make a decision, someone has to make a determination of whether or not you’re incapable. Most springing powers of attorney require some doctor’s authorization, so that can really become a problem for someone like your mother-in-law, who went back and forth between being able to make decisions and then unable to make decisions.
The springing power of doesn’t become effective until there’s a determination that you can’t make decisions for yourself. Initially, some clients feel that’s what they’d like. But the problem with that document is whoever determines whether the person can no longer make medical decisions throws some uncertainty into the equation. So, you could have a springing power of attorney and the person you’ve named takes over and goes to the bank and says, I’m taking over for Dennis because he can’t make decisions anymore, and I’m going to want to pay some bills. How do we know, he isn’t able to make decisions? Now you’ve got to get a letter from a doctor under the HIPAA regulations. So, this springing thing creates some problems that we choose to avoid by just making it effective immediately. Your power of attorney, once you have it, can be revoked very easily and very quickly. It’s not like it’s carved in stone once you have it.
Sally Smith: I never knew that there were the two types. That’s really fascinating to hear. Thank you so much for telling us about that, Dennis. And thanks to all our listeners for joining us today. We welcome your suggestions. This is Sally Smith, Age to Age, saying goodbye and wishing you courage and joy on your journey. We are all connected.
If you enjoy listening to Sally Smith, you can buy her book, The Circle. It’s the story of how she personally responded to her mother’s journey with Alzheimer’s disease. It’s a wonderful gift of hope for anyone with a parent with dementia. Just click on Sally Smith’s name under the Health Professionals tab on the Podcast home page. All profits support research at the Center on Aging. Thanks.