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Over the course of a year, we meet with many couples and their families where one spouse is no longer able to handle his own affairs. Some families handle this situation with remarkable grace; others do not. Many of these people come to us bearing previously executed powers of attorney in the hopes of avoiding guardianships and unwanted medical treatment. And all too often these documents are inadequate, if not worthless. Why? Because the drafting attorney used a “one size fits all” approach and did not customize the document to anticipate the potential problems of that individual client. Lawyers should do better. Here are some, but by no means all, of the problems we see with respect to powers of attorney, whether for medical or financial decision making. Most lawyers know enough to obtain their client’s financial information, and perhaps the names of children and grandchildren. Needless to say, you also need to assure yourself that the client understands what she is doing and is capable of judging the character and quality of the individual to be appointed as the client’s agent. But an appropriate document starts with a much more wide-ranging understanding of your client’s situation. How is the client’s health? What kind of care will the client need in the future, and how will it be paid for? Might there be a need for public benefits someday? What are the client’s goals and concerns? How do the client’s children interact with their parents and their siblings? What is their involvement in the client’s life now, and what can be expected from them in the future? Without this kind of knowledge of family history, you cannot write a document that will allow a family under stress to effectively support the principal or, if need be, protect the principal from abuse. THE STARTING DATE Now you can begin to draft the power of attorney. Start by clearly stating when the power becomes effective. If it goes into effect immediately, say so specifically — don’t leave us guessing. A financial institution or health care provider is not going to look up the statutory default. It will need clarity right on the page. If this is a “springing” power of attorney — which will go into effect upon some future event — describe the triggering event and the individual or entity who will determine when that event has occurred. For instance, if the power of attorney becomes effective upon incapacity, who decides that the principal is incapacitated? We have seen documents that direct the court to decide if the triggering event has occurred. This is not particularly helpful where the purpose of the document is to avoid court involvement. Additionally, if a power is only effective upon incapacity — a common choice — are other provisions being made for handling the client’s affairs when she is out of the country or otherwise absent? The reality is that springing powers do not always work well, especially with the privacy protections granted by the Health Insurance Portability and Accountability Act of 1996. How does one get access to medical documents to show that a person is incapacitated — say, suffering from dementia — if the agent has no authority to access those documents until incapacity has been determined? This can be a Catch-22 with no way out but court involvement. Perhaps there needs to be more than one triggering event. For example, there could be a trigger for access to medical information; another for making non-life-sustaining medical decisions, such as might occur when a person with dementia needs dental or routine medical care; and a third before an agent may make life-sustaining decisions. THE DECISION-MAKER The next important decision concerns the selection of the agent (or attorney-in-fact). Who should be named? All too often this choice is made without a reasoned discussion regarding the appropriateness of that individual. Of course, the spouse seems the obvious choice. But has any consideration been given to the spouse’s ability to perform the necessary functions? Does she have the experience to handle major financial decisions? When one spouse is gravely ill, will the other become paralyzed and unable to make reasoned choices? Has he the personality to challenge the medical establishment to obtain the information necessary to make well-informed decisions and to demand a specific level of care? These questions are relevant in selecting any agent, but they are more likely to be asked about a nonspouse. Should the agent who makes financial decisions be the same person as the agent who makes medical decisions? The skills and knowledge needed are not the same. An individual may be suitable for one role, but not the other. How many agents should there be? The norm appears to be one, with an alternate. Medical caregivers and financial institutions do find it easier to deal with just one person who has clear, undivided authority. But that does not mean a single agent is always the best choice. What will the choice of one agent do to family relationships? Will appointment of one child cause other children to feel excluded from decisions that do affect them all? Sometimes, a family is so dysfunctional that exclusion of one or more members from the decision-making process is necessary. In other instances, it is the very exclusion that breeds dissension, suspicion, jealousy, and litigation. Do the siblings get along? Is the appointed child likely to feel that he must be in sole control? Are any of the children taking advantage of the parents — or do any of the other children just think so? Perhaps it would be better to appoint a neutral person. Perhaps it would be preferable to appoint more than one of the children. There is no way to avoid understanding family dynamics if you are going to draft a document that adequately serves your client. If a single relative from among many is appointed, try to cut off future disputes. Consider a provision that the agent must give others pertinent information or must consult with them periodically or before making specified financial or medical decisions. Be clear about whether the agent is to be compensated, and if so, how that amount is to be determined. Consider whether the agent must act or is merely given authority to act. If the agent makes a mistake, will she be legally responsible for it? Is self-dealing permitted? If so, is the authority unlimited or limited — say, only with fair compensation? Accusations that the agent is enriching herself at the expense of the elderly relative or the rest of the family can be very bitter. Consider adding provisions that circumscribe the agent’s ability to self-deal and others to ensure that someone is watching what the agent is doing — perhaps through informal accountings to specified family members or formal accountings to a professional. If multiple agents are appointed, clarify whether they must act together or may act independently. How will disputes among them be handled? Can decisions be made by a majority? Should there be a binding arbiter? In one instance where a client insisted that all five children were to be the agents, the document provided that if they could not agree, our firm was to make the decision — and we were to be paid for our time at our regular hourly rates. This cut off disputes before they began. THE GIVING OF GIFTS Another area in which we frequently see problems involves the uncompensated transfer of client assets to others. Agents are not always given sufficient power to meet the client’s needs. Gifts may be permitted, but usually they are limited to the amounts excludable under federal tax law, or they must serve certain estate planning purposes. However, many elderly people also need to have their assets managed in ways that will qualify them for government benefits, such as Medicaid. Yet there may be no authority in the power of attorney to make uncompensated asset transfers for these purposes. Even when such asset transfers are permitted, the power may be unduly limited. For example, transfer of the family home from a person entering a nursing home to either a disabled relative or a caregiving child residing in the house may not be allowed. Yet either transfer is specifically permitted under Medicaid regulations. What about the agent making gifts to herself? As noted, any self-dealing can raise family disputes. Documents generally are silent on the subject or prohibit it out of concern that the authority will be considered a taxable power of appointment for the agent. But neither may be the right choice. Where the estate is small and the chief concern is planning for Medicaid eligibility, prohibitions against such self-dealing can foreclose planning opportunities. Where substantial gifts are to be made on behalf of an incompetent principal, the appropriate donee may well be the agent herself. In those cases, often too little thought is given to how this may be accomplished without causing the agent tax difficulties. For example, the document could permit such gifts subject to an ascertainable standard or require the concurrence of a disinterested party prior to any self-dealing transfer. Lawyers must look at a client’s situations closely and not be afraid to draft a power of attorney that addresses the client’s specific needs. To create a workable power, they must be ready to educate the client on the importance of thinking through these difficult issues. Any other document does a disservice to the client and the client’s family. The more some lawyers fail to heed this admonition, the more fees are collected by firms like ours that must unscramble the mess created by those poorly drafted powers. Helen Cohn Needham is a principal with Needham Mitnick & Pollack in Falls Church, Va., and a fellow of the National Academy of Elder Law Attorneys. Her firm provides legal services to the elderly, the incapacitated, and their families. Needham can be reached at [email protected].

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