Advance Directives

A well-drafted power of attorney is a tremendously powerful estate planning tool and should be part of every comprehensive estate plan. Such a document allows an “agent” to manage the finances of an individual who lacks the requisite level of mental capacity to manage their affairs. If drafted properly, it can be a very effective document and can preclude the commencement of a guardianship proceeding that would otherwise be necessary.

Power of Attorney

A power of attorney is a relationship whereby one party (the principal) gives another party (agent or attorney-in-fact) authority to make legal and financial decisions. The agent is the alter ego of the principal. The relationship is often created by contract.

Broad Power of Attorney vs. Narrow Power of Attorney

A power of attorney can really be drafted to the specific needs of a client. It can be drafted as narrow or as broad as the principal desires. However, most elderly clients will opt for a broader power of attorney because of its potential benefits.

Benefit of a power of attorney

In the elder law context, the objective behind a power of attorney is to allow the agent to transfer assets in the event of a catastrophic illness to protect such assets from estate taxes and/or the costs of long term care. If a person suffers a catastrophic illness and there is no power of attorney in place, any ability to preserve assets will come to a grinding halt. It will be necessary to bring a guardianship proceeding which is very costly, time consuming and intrusive.

Right time to execute a power of attorney

Unfortunately, we do not have a crystal ball and nobody knows what life will bring. There have been several instances where a client left our office with their complete mental facilities intact only to suffer a rapid decline in a very short period of time. It is always our first order of business with a new client to make sure they have a well-drafted power of attorney in place.

Different types of powers of attorney

There are several different types of powers of attorney but typically, in the elder law context, a durable power of attorney is used. A durable power of attorney is “durable” because it remains effective even should the principal lose capacity, which is precisely its purpose. You want the agent to be able to take action should the principal no longer be able to do so.

Recent changes to New York’s power of attorney laws

The most recent change to the New York power of attorney laws took place on September 12, 2010, but retroactively affected any powers of attorney executed on or after September 1, 2009.

Financial Institutions accepting a power of attorney

Financial institutions are often reluctant to accept a valid power of attorney even though the law states that such refusal is unlawful. Under the statute, a third party, including a financial institution cannot refuse to accept a power of attorney without reasonable cause. Examples of reasonable cause that would allow a financial institution to refuse to accept a power of attorney include the following:

-the agent’s refusal to provide an original or certified copy of the power of attorney

-the refusing third party had made a good faith referral of the principal and the agent to the local adult protective services

-actual knowledge of a report having been made to Adult Protective Services, regarding abuse by the agent

The following reasons for refusing to accept a power of attorney would be unreasonable:

-the power of attorney is not on the financial institution’s form

-there has been a lapse in time since the execution of the power of attorney. However, the financial institution can demand that the agent sign an affidavit that the power of attorney is still in full force and effect.