Make Sure your General Durable Financial Powers of Attorney are Updated
As we have discussed on a few occasions, a General Durable Power of Attorney for financial affairs is a legal document whereby an individual gives another individual the power to act on his or her behalf to make financial decisions. Powers of attorney are very important, especially when an individual becomes incapacitated. If an individual becomes incapacitated and does not have a financial power of attorney, then a family member will need to file an application to be appointed as the loved one’s guardian at the probate court in the county where the loved one was residing.
In addition to making sure that you have a General Durable Power of Attorney, you should also consider making sure that the language in the General Durable Power of Attorney authorizes certain specific activities. Even though a Power of Attorney most often contains very broad powers concerning the ability of an individual to act on behalf of another individual for his or her finances, if the Power of Attorney does not specifically provide for certain activities, then the Power of Attorney will not have the authority to carry out those activities. A couple of those activities are the ability to make gifts, and also the ability to establish special types of trusts used in asset protection planning.
In order for the Power of Attorney to be able to make gifts in situations where they may be trying to save estate taxes, or trying to protect assets from being spent down if long-term care is needed, the Power of Attorney must specifically authorize these types of gifts. Therefore, when you are reviewing your current Power of Attorney and you are interested in allowing your Power of Attorney to make gifts for these aforementioned reasons, you should make sure this power is included or update your Power of Attorney to include these specific powers for your agent to be able to make gifts.
Powers of Attorney are also very important when establishing an asset protection plan for an individual who may be in need of long-term care currently or in the future. One planning mechanism that is very useful is the establishment of a trust that can hold assets that are being gifted to your family or a pooled trust, which is a trust that holds assets that do not count against the amount of assets that an individual is allowed to retain and still qualify for Medicaid (currently, the maximum amount of assets is $2,000 for a single individual). You need to make sure that your power of attorney currently provides the ability for your Power of Attorney to establish these types of trusts, which will allow your loved ones to establish an asset protection plan to protect assets in case you need long-term care assistance.
Therefore, if you do not have a Power of Attorney for finances, you should consider contacting your local estate planning attorney to execute a Power of Attorney. If you currently have a Power of Attorney for financial affairs, you should review it to make sure that it allows your agent to make gifts and/or establish various types of trusts, which may be very important when establishing an asset protection plan.
NOTE: This general summary of the law should not be used to solve individual problems since slight changes in the fact situation may require a material variance in the applicable legal advice.
James F. Contini II, Esq.
Certified Specialist in Estate Planning,
Trust & Probate Law by the OSBA
Krugliak, Wilkins, Griffiths & Dougherty Co., LPA
405 Chauncey Avenue NW
New Philadelphia, Ohio 44663
Phone: (330) 364-3472
Fax: (330) 602-3187