Powers of attorney do not prevent guardianship

A General Durable Power of Attorney (GDPOA) is often suggested as a means of avoiding guardianship or “living probate.” While such a document is an important tool in a comprehensive estate plan, the GDPOA alone, or in conjunction with just a last will and testament, may not provide the protection the author seeks.

A GDPOA is a legal document that allows the “principal” to appoint another person (the “agent” or “proxy”) to conduct the business and financial affairs of the principal on behalf of the principal. This document is intended to assist in the absence of a director or during a time when the director may be physically or mentally unable to conduct business. Since the document is “durable”, it will remain in force and effect even if the principal becomes legally incapacitated. To be effective for real estate transactions, the GDPOA must be registered with the county clerk’s office where the property is located. A GDPOA is distinguished from a health care power of attorney and a limited power of attorney by its broad scope and application to a wide range of financial matters.

A power of attorney that is not durable does nothing to plan for disability, incompetence, or incapacity, and does little, if anything, to prevent guardianship. A power of attorney that is not durable becomes void when the principal becomes incompetent or incapacitated. Consequently, of the different forms of powers available, the GDPOA holds the most promise in planning for disability, incompetence, or incapacity.

However, in practice, GDPOAs can be quite weak and ineffective. Although powers of attorney are very common and the notion of GDPOA has become very popular, agents carrying power of attorney documents have not always been treated as if they were in the shoes of the principal. GDPOAs are routinely rejected by individuals and institutions upon submission. Elderlaw Scot Selis’s attorney writes on SeniorLawToday.com:

“If you have ever been frustrated by an organization’s refusal to honor a durable power of attorney, you are not alone. A power of attorney allows an individual to select another person or persons to handle their financial affairs. However, many institutions finance companies often refuse to honor a duly signed and witnessed power of attorney.

Indeed, it is frustrating for an agent to find their powers denied or ignored in transactions on behalf of a principal. However, the rejection of a properly executed GDPOA also undermines the intent of the director, who, in making the GDPOA, generally assumed that he was making things easier for his family. While an agent may apply to a court of appropriate jurisdiction to enforce his or her lawfully exercised powers, the prospect of having to litigate transactions that should take place in the ordinary course of business is beyond frustrating. Litigation is costly and time consuming, and was never the intent of the principal crafting the GDPOA.

The problem is so widespread that legal groups have complained to legislators, Attorney General’s offices and Commerce Departments about banks requiring the use of the bank’s own power of attorney forms and banks refusing to honor powers of attorney. legal in general. While these complaints have, over the years, resulted in more uniform legislation governing the GDPOA, practical problems remain.

There are a variety of reasons why a person or institution may reject a GDPOA. The most common reason given is that the GDPOA is “outdated” or too old. However, this reason is not based on any legal right, privilege or responsibility of the bank or institution. Most states allow a GDPOA that does not expire. Banks often reject these documents, supposedly based on their age.

Another reason given is that the GDPOA is not registered. Registration of a GDPOA is, as mentioned, necessary for transactions involving real estate, but is generally not required for other financial transactions. However, a person or institution may require that the document be registered. However, recording may not be in the best interest of the client, especially if it is unnecessary. Once registered, the GDPOA becomes a public record, available to anyone who requests it. A registered GDPOA, certified by the county recorder, can be a dangerous instrument in the wrong hands.

Another reason often given for rejecting a GDPOA is that the GDPOA does not allow the agent authority to carry out the intended transaction. This reason is based on the law, because a person or institution can be held liable if they accept the GDPOA to make a transaction not authorized by the GDPOA. Also, if the person or institution is notified that the agent is doing something that is not permitted by the GDPOA, the person or institution facilitating the transaction by agreeing to the GDPOA may be liable.

This potential liability is, of course, a huge disincentive for people and institutions that are asked to agree to a GDPOA. This disincentive is particularly acute when the agent seeks to close an account or settle a policy or asset using a GDPOA, because the individual or institution cannot know the final disposition of the funds. For example, if the GDPOA does not allow the agent to make gifts to the agent or third parties, or if state law prohibits such transactions, the institution may fear that closing an account or liquidating an asset could facilitate an improper gift. .

Aside from the reasons given, the motivations for rejecting a GDPOA are many and range from the right to the ignorant to the wrong. The right motivations are many. Institutions may prefer the legal certainty and protection of probate court approval. In such a case, the filing of the GDPOA may actually cause or influence to cause a guardianship application. The institution may, in good faith, suspect a misuse of the GDPR. The institution may even suspect that the agent is incompetent or incapacitated.

Improper motivations that cause rejection of a GDPOA include the desire to retain and maintain control of an asset, prevent discovery of improper asset management, undue influence from persons other than the agent, and disagreement with the use intended use of the assets by the agent when the intended use is lawful. However, there may be no way to distinguish the proper motivation from the wrong one, because someone who rejects the GDPOA will never admit to a wrong motivation.

Difficulties in getting institutions to accept a GDPOA add to the motives of family members seeking to control an older person’s wealth. Many GDPOAs are simply replaced by a family member filing for guardianship. Diane Armstrong, PhD, testifying before the Senate Select Committee on Aging wrote:

“Most of these [guardianship] petitions are filed by adult children seeking some form of control over the personal and/or financial affairs of their elderly relatives. They are battles between brothers rooted in questions of inheritance and control, often described as ‘thinly veiled pre-death contests of will’. Anyone who reaches age 62 with covered assets is at risk. As one forensic psychiatrist noted about these so-called protection procedures, ‘For every $100,000 in a given estate, there’s a lawyer; for every $25,000 a family member appears; and if there’s no money, no one shows up’ (quoted in Harold T. Nedd’s
Fighting for the care of aging parents,
USA TodayJuly 30, 1998).”

Equally worrying is the fact that short they often ignore the GDPOA! The very document that most people rely on to reduce the chance of a court-appointed guardian is often simply ignored by the probate court. Diane Armstrong proved to the Senate Select Committee on Aging that:

“When an older person is brought to court and forced to prove their competence, we soon see that the system is broken. We have a system rife with court-sanctioned elder abuse. Why? have established place in the codes.
Judges ignore lasting powers – the most important document each of us can create to determine our care should we become incapacitated… Judges ignore our lists of pre-selected substitute decision makers. The current system does not work.

Consequently, the GDPOA does not provide complete protection against guardianship. In particular, if a person foresees the need for such protection due to the size or composition of his estate, or due to the composition of his family, or due to lack of unity in his family, he should consult with an estate planning attorney. . familiar with trusts designed to hold and maintain control of assets and decision making outside of the involvement or control of the courts. Such trust planning, as part of a comprehensive estate plan, can provide a more comprehensive solution than a GDPOA and Last Will and Testament.

Regardless, there are some strategies that can help increase the chances that an individual or institution will accept a GDPOA. First, have the estate plan reviewed annually and periodically re-run the GDPOA. Second, provide institutions with copies of the GDPOA prior to any illness. Request a letter from the institution acknowledging receipt of the GDPOA, and the result of its review. With a letter from the institution that the GDPOA document will be accepted, there is a greater chance that the GDPOA will be accepted in the future. At a minimum, there is always the hope that the person providing the letter will still be in the institution when the GDPOA is used.

Third, run the institution’s proprietary GDPOA. Some banks and brokerage firms require customers to sign their own power of attorney form to allow others to handle customer accounts. Generally, there is nothing wrong with these abbreviated powers of attorney as long as they do not revoke, but merely enhance, the provisions of the GDPOA. If you have any questions or concerns, simply get a copy and have it reviewed by an estate planning attorney. Finally, add agent names to all accounts such as “agent” or “proxy” before an illness occurs. Titling assets accordingly does not confer property rights on agents, but it does increase the chances that the GDPOA will be accepted without reservation when necessary.

But perhaps the best strategy for planning for incompetence, disability, and disability is a comprehensive estate plan that includes a trust.