How can I get authority to help manage my spouse's or parents' affairs?Posted: Updated:
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(provided by Dick & Karen Sayre, Sayre & Sayre, p.s.)
In the State of Washington there are only two ways for one person to handle the affairs of another person. The first and best way is to make arrangements in advance by signing a Durable Power of Attorney giving a surrogate decision maker those powers the principal (your spouse or parent) wishes them to have to manage their financial affairs and provide for health care needs. If no such document is signed or if a document is signed but is insufficient in its grant of authority for the agent to handle matters which have arisen, the recourse is to ask the court to grant such authority. This is often done through the establishment of a guardianship.
Preparation of a Durable Power of Attorney can be accomplished in a short period of time and is relatively inexpensive. Your spouse or parents' assets can remain where they are and the agent will have the power to access those assets to pay bills and manage the principle's affairs in any manner the document directs. A Power of Attorney is an extremely important estate planning document, and has become even more so as a result of changes in federal and state assistance long term care programs and the increased medical costs associated with disability.
The person signing a power of attorney is known as a "principal", and the person to whom authority is granted is called the "attorney-in-fact" or "agent". The attorney in fact has the authority to take only those actions specifically set forth in the document. If the document does not contain the language which gives the attorney in fact the power to take a certain action on the principal's behalf, the attorney in fact cannot take that action. So, the wording of the document is critical.
It is important to be sure that the document is called a Durable Power of Attorney (or General Power of Attorney with Durable Language), which confers broad powers on an attorney-in-fact without regard for the competence of the principal. Typically, when dealing with disability issues, the only form of Power of Attorney which is appropriate is the Durable Power of Attorney. If you or your parents have an old General Power of Attorney and there is no durability language, the powers will cease to be effective if the spouse or parent becomes disabled, which may be exactly contrary to what they had intended.
A person should only use a Durable Power of Attorney if they trust the person they are designating to make decisions for them absolutely and without reservation. The grant of authority is broad and, if the principal is disabled, they may not realize they are being taken advantage of by an unscrupulous relative or friend. Extreme caution should be used in the selection of an attorney-in-fact; however, if there is a trustworthy spouse, child or relative available to act, this instrument will provide great flexibility for them and the family.
If you or your parent decides to have a Durable Power of Attorney drafted, it is crucial that great care is used to determine what authority will be granted to the attorney-in- fact. The attorney-in-fact can make investments if specified within the document. They can also be empowered to have management control over pension plans, IRAs, annuities, life insurance and other assets. The attorney-in-fact can also be given the authority to make transfers or gifts which may qualify the principal for Medicaid at home (called "COPES"), in an adult family home, assisted living facility or in a skilled nursing home.
If you or your parent has a taxable estate, the document can contain the power for you to make death bed gifts to lower the tax impact of their death. It could also give you the authority to make valid disclaimers on their behalf, which may cause property which would have been inherited by your parent to bypass them, and pass on directly to their children. This can save significant estate tax, and may protect assets from Medicaid inclusion and liens within applicable limitations imposed under the law. State and federal law discourages this practice in the Medicaid context and applies transfer penalties to disclaimers from a potential Medicaid recipient; however, even with a penalty, often a disclaimer is appropriate in this context, so inclusion of the power makes sense. The savings which can result from a timely disclaimer in the event of potential inheritance tax or serious long term illness can be significant.
The attorney-in-fact can be specifically empowered to change some types of estate planning documents if appropriate, including the cancellation of community property agreements when necessary to preserve assets in a disability context. Cancellation of a community property agreement is normally only done to prevent assets transferred from a disabled spouse to a well spouse to not revert back to the disabled spouse upon the unexpected death of the well spouse, which could cause the ill spouse to lose needed benefits. It is important to note that an agent acting under a Durable Power of Attorney does not have the power to revoke a will or execute a new one on behalf of the principal.
The attorney-in-fact can be empowered to make medical decisions for the principal, including the withdrawal of life support equipment, and artificial nutrition and hydration, should the principal wish such actions to be taken. A Durable Power of Attorney can take effect immediately, or only upon disability. If it becomes effective upon disability it is called a "springing power" and requires a declaration or letter from the principal's treating physician or some other person stating that the principal is no longer able to effectively manage their affairs to become effective.
If there are several trusted family members, it is important that you or your parent name an alternate attorney-in-fact in the event the first designated individual is unable or unwilling to act. In the event no alternate is named and the principal is no longer well enough to sign a new Durable Power of Attorney, the old document is null and void. In that case it would be necessary for a guardian to be named for your spouse or parent and that individual would then have authority to manage their affairs.
The "form" Durable Power of Attorney you or your parents may have obtained at a stationery store years ago or downloaded on the internet is probably not adequate to permit transfers to allow someone to qualify for Medicaid assistance. It must be created by a qualified attorney who understands your objectives and gifting intent to authorize such transactions. If disability is an issue, you should consult with an attorney who practices "Elder Law" relative to the somewhat unusual powers necessary to maximize benefit eligibility. Washington law restricts some of the powers granted to an attorney-in-fact in this area, and waiver of those restrictions may be necessary to permit gifting to qualify for Medicaid assistance.
If you have questions about your spouse or parents' Durable Power of Attorney, you should have them contact their attorney as soon as possible, hopefully before they become disabled.
Powers of Attorney should be updated about every five years. If the one you have is older than this, it's time for a review.
(Sayre and Sayre is a Spokane-based law firm specializing in Elder Law issues)
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