Financial powers of attorney may be the most (if not one of the most) important documents that almost everyone should have as illustrated by the following sad (but true) story:
Husband dies (with a Will) and leaves everything (although the estate is not large) to wife. The wife lacks mental capacity at the time of inheritance and is living in a nursing home which costs approximately $7,000 per month. The wife’s income (which is only Social Security) is less than the cost of care. Children have no access or authority to handle mom’s (wife’s) assets. The only estate planning document wife has is a Will (which is ineffective until she passes). The children have little assets of their own and the nursing home requires payment for its services.
So, what’s the solution resulting from mom’s failure to have one of the most basic estates planning documents (a financial durable power of attorney)? If mom had simply executed a financial durable power of attorney, then whomever she trusted to act as her agent during her life could have paid her bills and had access to assets. However, that was “yesterday – when all the children’s problems seemed so far away. Now it looks as though they’re here to stay”.
When you fail to plan, the law of the state usually has an answer. In this case, one or more of the children will probably seek the process of temporary guardianship (to get to mom’s (wife’s) money as soon as possible) of the estate of mom and then seek permanent guardianship. This is a costly and time-consuming process to get to mom’s assets to pay for her care with her funds. Some of the requirements of one seeking guardianship of the estate include the appointment of an attorney to represent the ward (mom in this case) since you can’t take away someone’s rights without representation (in addition to an attorney for anyone seeking guardianship over the ward), the probable requirement that a bond is posted (in case the appointed guardian acts wrongfully), the approval of the court on how to spend funds of the ward (mom), an annual accounting to the court, etc. This lengthy and costly process could have been easily avoided with a financial durable power of attorney. Even if mom had no or limited assets, a financial durable power of attorney may have been eventually needed in obtaining or retaining public benefits (i.e., long-term Medicaid) for mom. Furthermore, additional powers could have been included in the financial durable power of attorney to protect more resources or do planning that a court may not permit.
Basic estate planning documents such as a will, trust, financial durable power of attorney, medical power of attorney, directive to physicians, HIPAA authorization, declaration of guardian in the event of later incompetence or need, etc. should be considered by every adult who has sufficient mental capacity. In this sad case, the children believe that mom’s failure to have a simple general durable power of attorney has left them “bewitched, bothered, and bewildered.”
If interested in learning more about this article or other estate planning, Medicaid and public benefits planning, probate, etc., attend one of our free upcoming virtual Estate Planning Essentials workshops by clicking here or calling 214-720-0102. We make it simple to attend and it is without obligation.