If you are thinking about planning for your care or the care of a member of your family, the Power of Attorney is a fundamental document. This is a legal document where someone (the “principal”) gives authority to someone else (the “agent”) to do something on behalf of the principal. The scope of authority granted to the agent might be very large (a “general power of attorney”), or the agent might only be given the power to carry out a specific task or a few specific tasks (a “limited power of attorney”).
When you as a principal execute a power of attorney, you are not giving up your own authority or power to do the same things that you are allowing the agent to do. In effect, a dual authority is created: either you can act for yourself, or the agent can act on the principal’s behalf in any situation where the agent has been given the power to act. When a power of attorney is “durable,” it remains in force even when you have lost mental capacity to act on your own behalf.
The principal retains one power that the agent will never have: the power to revoke the power of attorney. Also, every power of attorney is automatically revoked upon the death of the principal.
The general power of attorney, which we normally recommend, is a powerful legal document. It gives the agent virtually unlimited powers over the principal’s money and property, and affairs. While the agent is legally required to act in the best interests of the principal, the choice of an appropriate and trustworthy agent is obviously extremely important.
In New York, the power of the agent to make gifts is given special attention and treatment. The principal can execute a separate “gift rider” to the power of attorney that gives the agent the authority to make gifts and transfers of the principal’s money and property to others, including to the agent himself or herself.
The general power of attorney and the gift rider often play a critical role in Elder Law planning. In order to implement a health care plan that involves qualifying for Medicaid, it is often necessary to transfer ownership of the principal’s money and property to family members or to a trust. In many cases, the principal is losing, or has lost, mental capacity. Without a durable general power of attorney with gifting powers, nobody would be in a position to help the principal obtain the health care – particularly the long-term care – that he or she needs.
While the power of attorney is fairly straightforward in concept, in practice it is a complicated document that merits careful consideration. What all the different powers mean and whether they should be granted, how and when the document should be signed, where it should be kept, to whom it should be given, are all important issues. Most people will find it advantageous to consult an attorney before signing one. If the power of attorney is being contemplated as part of health care planning, then it would be prudent to have the document prepared by an Elder Law attorney, since numerous modifications of the “standard form” will likely be needed to allow the agent to implement the plan.