Posts filed under 'Power of Attorney (POA)'
November 30th, 2010
Many seniors currently need assistance paying their bills and managing their finances, or may need help sometime in the future. It’s important to have a trustworthy person authorized to manage your finances should you be unable to do so yourself.
For many seniors, adding a child or other loved one as co-owner on bank and brokerage accounts can be an easy and convenient way of managing those assets and making sure bills are paid on time. However, many seniors do not take into account the possible risks and potential consequences of joint ownership, and the other available alternatives that may be more in line with their objectives.
First, be aware that a joint owner will have complete access to your bank account and has the right to make an unlimited amount of withdrawals, even if it is your money in the account. A joint owner can write checks and withdraw money without your permission. This is why it is imperative to name an individual who you trust will act in your best interest.
Second, once your co-owner’s name is on the account, your money will be vulnerable to his or her creditors. For instance, if your co-owner goes through a divorce, has a business failure, or gets sued, your money will be exposed to those claims.
Third, when you die, the assets in a jointly-owned account will automatically become the property of the surviving owner. A joint owner generally has a ‘right of survivorship,’ so the assets will pass directly to him or her at your death. This can be a desirable and convenient way of passing assets at death, as long as it is in line with your wishes. However, the results can be disastrous if your intention is for the money to pass to someone else, or to be divided among several beneficiaries according to the terms of your will.
Additionally, as Elder Law attorneys, we are always concerned with possible Medicaid implications. Many people erroneously believe that Medicaid will view a joint account as being owned half by the Medicaid applicant and half by the other owner. However, Medicaid presumes that the entire account belongs to the Medicaid applicant, and the burden is on the applicant to prove otherwise. Therefore, joint ownership does not protect any portion of an account from Medicaid’s rules unless it can be proven that money in the joint account belongs to someone other than the Medicaid applicant.
A joint account may be appropriate in certain situations, however, there are several alternatives to joint accounts that can protect you and your assets in different ways.
One simple alternative is to sign a durable power of attorney, and file it with the financial institutions where your accounts are held. Your agent under your power of attorney would be able to manage your finances on your behalf, including making withdrawals and writing checks without your permission, but the assets would be owned by you alone. Your agent would have a legal duty to manage your finances on your behalf and in your best interest.
Also, if you are the sole owner on the account and have a power of attorney, you should designate beneficiaries to avoid lengthy and costly probate proceedings. By using “in trust for” (also known as “ITF”), “pay on death” (also known as “POD”) or “for the benefit of” (also known as “FBO”) designations on your accounts, your money will pass directly to the beneficiaries that you have listed after you pass away, but they will have no ownership interest during your lifetime.
Although they are beneficial for assistance with managing your assets while you are alive and distributing your assets after death, neither a power of attorney nor an ITF designation will protect your money should you need to apply for Medicaid benefits. In almost all situations, the best and most protective vehicle for safeguarding your assets is going to be a trust. A trust is a legal entity that is created in order to assume ownership of your assets and property, and hold them for your benefit during your life and for your beneficiaries after your death. A Trustee is named to manage the funds in the trust according to the terms of the document.
Once your assets are transferred to the trust neither you nor the Trustee is the owner of the funds, thereby allowing you to become financially eligible for Medicaid benefits. Additionally, the trust protects your money from your – and your Trustee’s – creditors (including Medicaid). At your death, the trust assets pass to the beneficiaries you designate within the trust agreement itself. There are several types of trusts available to protect assets and property from potential creditors, avoid probate, and keep your assets safe and available for you even if you need to apply for Medicaid services.
As you can see, there are many ways to title your assets in order to place yourself in the best possible position according to your particular needs and comfort level. It’s important that you speak to an Elder Law attorney about planning for a time when you may be incapable of managing your own affairs and placing you in the most advantageous position possible should you need to apply for Medicaid. Elder Law attorneys will work closely with you to devise a plan that works for you and in which your priorities are tantamount. If you would like advice about your specific situation, call us today at (212) 447-8690.
November 30th, 2010
David Cutner discusses why the Durable Power of Attorney is a cornerstone of effective Elder Law planning, and one of the keys to your being in charge of your future.
September 9th, 2010
New York State Governor David Paterson signed the Power of Attorney (“POA”) revision bill into law on August 13, 2010, which becomes effective on September 12, 2010. The bill significantly revises the previously amended POA statute that went into effect on September 1, 2009.
2009 Law
The September 1, 2009 POA law was intended to curb fraudulent behavior and abuses by agents (primarily against elderly principals), and to prevent principals from delegating broad powers to their agents without understanding what they were doing. The law imposed a more complicated and lengthy statutory POA form; required a “statutory major gifts rider” (“SMGR”) to be executed simultaneously with the statutory form in order to give the agent gifting power of more than $500; and set forth strict requirements for the execution of the documents. However, there were problems with the 2009 revision, such as the automatic revocation of previously executed POAs and the fact that every POA executed in New York State, including limited POAs for specific business or commercial transactions, had to comply with the law’s rigid requirements.
2010 Law
The 2010 revision addresses many of the problems with the 2009 POA law by clarifying certain ambiguities and eliminating certain provisions. Among the changes are:
- Addition of a provision that expressly provides that previous POAs will not be automatically revoked by executing a new POA
- Exclusion of POAs executed for specific limited business or commercial purposes, such as real estate transactions and proxy voting powers, from compliance with the requirements of the new law
- Clarification that powers of attorney may be used to make gifts in accordance with a preexisting pattern of gifting up to $500 in the aggregate (not per donee)
- The renaming of the “statutory major gifts rider” (“SMGR”) to the “statutory gifts rider,” (“SGR”) under which all other gift-giving authority must be made
- Clarification that the notary can serve as one of the two necessary witnesses during execution
- Clarification that a mistake in wording, such as spelling, punctuation or formatting will not invalidate the statutory gifts rider or statutory short form POA
The corrections will be retroactively applicable to POAs executed on or after September 1, 2009. Therefore, POAs properly executed under the 2010 law between September 1, 2009 and September 12, 2010 will be deemed valid in the state of New York and will not need to be re-executed even if they do not comply with the 2009 law.
April 27th, 2010
A Durable Power of Attorney is a vital document for anyone, but it is especially important for individuals engaging in estate and long-term care planning. Most people mistakenly assume that close family members (such as spouses or children) will have the authority to manage an individual’s assets when he or she is no longer able to do so. Without a Power of Attorney, this is simply not the case.
The Power of Attorney gives an agent (also known as attorney-in-fact) the authority to make financial decisions and manage property on behalf of a principal. You can designate more than one agent, and you can determine whether or not you would prefer them to act together, or have to ability to act separately. You can also designate a successor agent, so that there is someone who can fill in when your agent is unable or unwilling to act.
A Power of Attorney can be limited and only grant the agent authority over specific acts, or it can be a broad grant of a wide range of powers. A Power of Attorney that is durable allows the document to continue in full force once the principal loses mental capacity. It is essential that you execute a Durable Power of Attorney, so that your attorney-in-fact will not be left powerless if you have lost mental capacity.
Your attorney-in-fact can do many things, including pay your bills, manage your investments, sign financial documents on your behalf, and even transfer your money, if given the authority to do so. If you grant broad powers, your agent will be able to do anything that you can do with regards to your assets or property.
Because a Power of Attorney can give an individual complete control over all of your property, it is crucial that you choose a person who is right for the job. When choosing your agent, make sure he or she is a trusted individual who is responsible, dependable, and ethical. He or she does not have to be a lawyer or a financial expert, but should be someone who is competent to handle financial matters. It is important that you communicate to your agent how you wish your assets to be managed should you be unable to do so yourself. Also, make sure you fully disclose all of the property you own, and which financial institutions you hold accounts with, so that your agent has full knowledge of the extent of your assets. It is also imperative that the attorney-in-fact knows where the original signed power of attorney is being kept, since financial institutions often require an original document.
And remember: if you find that you are unhappy with the way your attorney-in-fact is handling your affairs, or change your mind for any reason, you can always revoke the Power of Attorney.
August 4th, 2009
New York State’s new rules governing the use of the Durable Power of Attorney document are designed to make sure that, when granting powers to an agent, you fully understand what you are doing, particularly when the agent is being given the power to make “major gifts” of your money or property, to himself or others. Also, the agent is now required to acknowledge his responsibility to act in your best interests, and to sign the document himself.
Here are a few of the specific provisions in the new law regarding the Durable Power of Attorney:
- Your property must be kept “separate and distinct” from any property individually or jointly owned by your appointed agent.
- Your agent may not transfer any property to himself or herself without your specific authorization.
- Agents are required to avoid conflicts of interest.
- Your agent must keep records of payments, receipts and other transactions, and produce them for inspection at your request, or at the direction of another party you choose to monitor his or her conduct. Certain government agencies are also entitled to inspect records.
- Records need to be made available for inspection with 15 days of a valid request.
- If your agent does not comply with authorized requests for inspection of records and activities, special proceedings are available under the new law to force compliance.
- Agents can be legally liable for failure to act according to a “prudent” person standard in relation to your finances and assets.
To learn more about why a Durable Power of Attorney is so important in regard to Elder Law strategies, Medicaid eligibility and estate planning, see Strategies # 17 in Lamson and Cutner’s Special Report, 25 Strategies to Prevent Financial Ruin from Long-Term Health Care Costs here.
July 29th, 2009
A Durable Power of Attorney is an essential and critical document for Elder Law planning. A common mistake made by many elderly individuals is to assume that a standard Power of Attorney they obtained in a stationary store or downloaded from the Internet will suffice for Medicaid eligibility planning purposes. These documents are not powerful enough to cover the broad spectrum of scenarios that can and often do arise.
New York State has enacted new rules and requirements that apply to all Durable Power of Attorney documents, to become effective on September 1, 2009. The net effect of this legislation is to provide you with more protection. It’s intended to reduce the incidence of potential abuse of rights and privileges you convey to your appointed agent.
Major changes to existing law include the following:
- Agents are required to acknowledge their responsibilities by signing and dating the document. The signature must be notarized.
- If you give your agent the power to make gifts from your assets, special language and a rider must be added to your Durable Power of Attorney. The rider must be validated by two witnesses.
- The authority to create certain types of Trust structures now has to be provided for in an additional rider to the Durable Power of Attorney.
- The ability to set up joint bank accounts, designate insurance beneficiaries, or to change beneficiaries on retirement plans must be specifically authorized with additional riders.
- The new law makes specific provisions for you to appoint an outside party to monitor the activity or your chosen agent. For example, you can require the agent to submit a record of payment and receipts for review to the party monitoring him or her.
- There is a “statutory” form of the Durable Power of Attorney that includes language specified in the legislation. Third parties who are presented with the statutory form of the document must accept it.
An experienced Elder Law firm is your best source for help with drafting the new document specifically targeted to your unique needs. To learn more about effective use of the Durable Power of Attorney, please see Strategy # 17 in Lamson & Cutner’s Special Report, 25 Strategies to Prevent Financial Ruin from Long-Term Health Care Costs here.
