Hello I’m Bernie Krooks from the American College of Trusts and Estates Counsel and today I'd like to talk to you about Powers of Attorney. Now you may be asking yourself, "why should I care about powers of attorney? Isn't that for people with a lot of money, people on TV, celebrities?" Well actually not. A power of attorney is the single most important estate document that you can sign. In fact, I like to think it's a gift you can give to your family and loved ones. Something that will make their lives easier in the event that something happens to you, and here's why.
We as Americans are aging. In fact, over ten thousand people a day will turn 65. In that demographic segment, the 85 and overpopulation is the fastest growing segment. So, modern medicine as you can see is doing a wonderful job of making sure we stay alive. The problem is when we stay alive we get things like Alzheimer's disease, Parkinson's disease, dementia and other ailments that affect our ability to make financial decisions for ourselves. So, what's one to do about it? Well, what you can do about it is think about who you would want to make those decisions for you in the event you can't make them yourself. So, when people think about estate planning generally what people think about is, how do I protect my assets from the tax man? How do I make sure my family members get my assets after I pass away?
Actually, well that's also very important, what's even more important is making sure that you have a plan for incapacity, because most of us, in fact two-thirds of us, are likely to become incapacitated before we die. And if we become incapacitated before we die and we don't have a power of attorney in place, then our family is going to have to go to court to seek a legal guardian for us. In some states they call that a Conservatorship. It's one in the same, and that means somebody's going to have to spend thousands of dollars on lawyers’ fees to have someone appointed to make medical and financial decisions for you... and it may not even be a family member. So it could be some stranger on a list that the judge has inside his or her desk. So you really want to make sure that you take the time to think about who you would want to make those decisions. And I get it. I know this is not something you want to think about because we're all probably thinking... well this is not going to happen to me. And you may be right. It may not happen to you.
My message to you today is you should take the time to think about whether or not if it does happen to you who's going to be making those decisions for you. Now this is not gonna be fun. This is not like planning a family vacation, or picking out the new color of the living room carpet, or going and buying a new car. Those are fun things to do. This is not fun, but remember it's a gift because you're going to be telling your family members who you want to make these decisions for you, and hopefully they won't fight about it. So your son won't be arguing with your daughter about who's going to control the bank account because you have already spoken on that issue and they will be required to respect your wishes as long as you do it right. Now that's the key part... this is not some form that you download from the internet.
A power of attorney is a complex form and you really have to work with a dedicated professional... somebody who spends their professional time working on estate planning matters. They're pretty much two players in a power of attorney situation. There's the principal, and that's going to be you. That's the one who decides who's going to make the decisions for them in the event that you become incapacitated. The person who you appoint is called an agent. Now some lawyers may call it an attorney in fact, and there are other names for it, but basically the attorney-in-fact and the agent are the same person. They're the person who is going to manage your affairs, pay your rent, pay your bills, manager investments in the event that something happens to you.
Now, when you sign the power of attorney and you executed it, this is not something that you put in a drawer never look at again, because circumstances can change. The person who you appoint as power of attorney may get sick the relationship with that person and you may change, so you want to make sure that whatever plan you put in place that you keep it current. And you want to make sure you pick the right person. Well, who do you pick? You don't have to pick a family member. You can pick a trusted advisor, but most people in my experience will pick a family member. And then of course if you've got more than one child, do you picked the son, do you pick the daughter? Can you pick all of them?
The answer is yes. You can have more than one, but then if you have more than one well there's each one has the authority to sign your checks? Do they both have to have a signatory on the account? Again, it's up to you. So there's a lot of flexibility in how you do it. The point is you just have to decide how you want to do it. The states have all different kinds of laws on how you make sure that the power of attorney that you sign is actually valid. How many witnesses do you need? Do you need a notary public? Cause what's the point of doing a power returning and then your agent goes to use it and the bank says, we're sorry you didn't course this T or dot that I, and it's not valid and now mom's already sick, and she had a stroke, and she could no longer sign a power of attorney.
You can only sign a power of attorney if you have the capacity to do so. So once you're sick it's too late. So when is the right time to do this? Well, technically right before you get sick! But that's not how life works. God doesn't pick up the phone and say, listen hey Bernie, in five minutes you're going to have a stroke... you better sign the power of attorney. It doesn't work like that. That's why you have to do it now. This is not something that's irrevocable, it's only going to become irrevocable once you get sick. So the key is to do this before you get sick. And... who you're going to pick? I don't know, there's no one right person here to the pic.
You gotta pick somebody you trust... because there's a couple of different kinds of powers of attorney that you can sign. One is effective immediately. So I sign the power of attorney right now, and then you're my agent, and you can manage my affairs for me just like I can. So we both have the power to manage my bank accounts at the same time. That may make you feel uncomfortable. Why do I need you managing my bank account when I am perfectly fine? Why don't I have a power of attorney that springs into effect when I'm sick? That would make more sense. It seems to me that I don't need the power of attorney as long as I'm fully functional and able to manage my affairs... why not have one that comes into effect when I become incapacitated? And I'll tell you why.
Capacity is a very difficult concept in the law. It's not clear a lot of times whether or not somebody has capacity. Clearly if somebody has a stroke and they're in a coma, they're incapacitated, but you know, just recently I forgot somebody's phone number, I couldn't remember where I place my car keys, maybe you forgot a grandchild’s birthday... Does that person have capacity or not? Or they just a little forgetful as we’re getting older? So to determine whether or not somebody has capacity and whether or not the power of attorney springs into effect can be a big deal.
So the time when you actually need to use it, you could be handcuffed, or your agent could be handcuffed. So this is a personal decision... my point to you is that there's all different kinds... you want to make sure that the power of attorney that you get is durable. So it has to survive your incapacity. You definitely don't want a power of attorney that is going to become void once you have that stroke. So you got to make sure it's a durable power of attorney. If you talk to your attorney in your professional about this they’ll make sure that you get a power of attorney that's durable. Once you sign it, the agent, or your attorney in fact will have the authority to sell your property, to manage your investments, to even make gifts of your property if you so desire. And gift-giving can be a very important component of an estate plan, but these are personal issues.
No one power of attorney is going to look like somebody else’s. So this is not something you take down to the Senior Center on a Friday night and show your power of attorney to the next person... how come yours is different than mine? The truth is they can all be different, but they can all be valid. So this is a personalized customized document that you have to make sure it's going to work for you. You must make sure you have capacity when you execute it, and you must make sure that the power of attorney is durable. If it's not, then the person on the power of attorney is not going to have any authority to act for you.
Finally just in summing up, I understand that these are not easy issues to discuss with your family, however, failure to discuss the power of attorney with your family, failure to take the time to actually think these issues through is not going to prevent you from becoming incapacitated. By having a power of attorney in place you’ve made a gift to your family. You're going to allow them to manage your assets in the event you become incapacitated. Make things easier for them, and hopefully it won't happen to you, but like I say, let's hope for the best and plan for the worst by signing a durable power of attorney today. Thank you very much.