May 15, 2023
By: Anthony B. Ferraro
Long-term care is often a pressing concern. Nearly 70% of individuals are expected to require assistance. When planning for long-term care, having advance directives in place is essential. Advance directives are documents used to provide guidance for the caretakers of individuals who are ill or incompetent. There are several types of advance directives, including Living Wills, Five Wishes, Do Not Resuscitate Orders, and Powers of Attorneys.
Powers of Attorney are considered by some to be the most beneficial and important estate planning document to have in place.
Why is the power of attorney so important?
A power of attorney is a legal document where one person called the “principal” authorizes another person called the “agent” to act on the principal’s behalf regarding either financial or health related decisions.
Without a power of attorney in place, no one may have the legal authority to act on another’s behalf, and therefore a guardianship proceeding may become necessary. A guardianship proceeding is conducted in court and establishes a legal relationship where a person(s) is appointed by the judge (usually a family member) as the guardian of the person that will have the power to make health decisions for another; usually called the ward. The same person may also be appointed by the court as the guardian of the estate of the ward to make financial decisions and manage the financial assets of the Ward.
Guardianship can be expensive. It requires the opinion of a physician and the appointment of a guardian ad litem, an attorney who acts as the eyes and ears of the judge. Guardianship also requires many process formalities and judge’s orders. These matters are strictly observed to ensure that the ward is protected. This is all well and good, and we are all fortunate to have a legal system that can help serve those that are disabled and may not have had the opportunity to put in place a power of attorney. However, this costly process may be avoided by having valid powers of attorney for property and healthcare matters in place.
How many different types of powers of attorney are there?
In Illinois we have two types of powers of attorney: one for health and one for property and financial matters.
We generally recommend you use the Illinois Statutory Short Form Powers of Attorney (one for health and a separate one for property). These are the type of forms that doctors, other health professionals, banks and other financial institutions most readily recognize.
How old should you be when you start executing powers of attorney?
Upon turning 18 years of age.
When a child has reached age 18, no one, including parents, can make either financial or medical decisions for that child without legal documents—such as powers of attorney—authorizing this decision-making power.
Can I create my own power of attorney?
Yes, however, it may not contain the necessary language that elder law attorneys put into such documents such as: the power to make specific types of gifts to family members. This is necessary for tax minimization and for seeking governmental benefits like Medicaid. Other important language may deal with the power to remove and add assets to trusts, the power to apply for public benefits and the power to appeal any decision on public benefits. Standard power of attorney forms generally do not have these provisions built into them. By not having this language in place, many are missing out on benefits and protection.
What are the risks and the appropriate safeguards?
Since a power of attorney for property and financial matters authorizes your agent to be able to make disbursements of money on your behalf, this power can be abused.
To prevent, or at least minimize the risk of a rogue agent abusing the power, it may be useful to put restrictions in the powers of attorney for property and financial matters, including:
1. The agent could be required to provide monthly statements from all asset custodians to an independent third-party, selected by the principal who has the right to request the delivery of these monthly statements and will do an independent reading and review to determine whether the expenditures by the agent are solely for and in the best interests of the principal.
2. The agent could be precluded from creating joint tenancy accounts between the principal, the agent himself or herself, and/or the principal and any third party.
These are just examples of some of the precautions that can be taken so that a good power of attorney is put in place and steps are taken to make sure that any possible abuse by a rogue agent is minimized.