Why You Need a Power of Attorney—Before It’s Too Late
Credit: Nevin Beiler, Attorney
There was a long pause. All of the people around the table were waiting for John to answer the question. The question was simple enough: “How many children do you have, and what are their names?” But for John, who was in his upper-sixties and struggling with the effects of a stroke he had about a year ago, this question was not easy to answer. He slowly listed the names of his first four children, but was unable to list the last one. He turned his head to look at his wife and his daughter, who were sitting on either side of him, but I had instructed them that John needed to answer the questions I was going to ask him by himself. This was the first question, and was supposed to be the easiest.
This was not how this meeting was supposed to go. John’s wife, Mary, had called me a few days before and said that they needed to have durable powers of attorney prepared so that their oldest daughter could help them with financial management. A durable power of attorney is a document that gives legal authority to someone else to act on your behalf. For example, an older person will often have a power of attorney that gives a responsible child or other trusted relative authority to manage their bank accounts and other property.
When Mary initially called me, she had not said anything about John having a stroke, and I had not asked her. But now, sitting and waiting to see if John could name his fifth child, it was becoming clear to me that I could not help John create a power of attorney. The fact that he could not name the town where they were living or respond to several other simple questions made this even clearer.
John probably would have willingly signed anything we put in front of him and told him to sign. He seemed to trust his wife and his daughter to do what was right and to ensure that he received proper care. But as an attorney, it would have been a violation of the Pennsylvania Rules of Professional Conduct for me to help John prepare and sign a legally-binding document if he did not understand what he was signing. If he could not remember all his children’s names and other simple information, trying to establish that he had the necessary legal capacity to sign a power of attorney document appeared hopeless. Helping John sign a power of attorney while knowing that he did not have legal capacity to do so would put my law license in jeopardy, and someone could later challenge the validity of any actions taken under his power of attorney because the document itself and the authority it tried to give would not be valid.
John’s wife and daughter were understandably disappointed to discover that John could not create a power of attorney, but they took the news graciously. Fortunately, John and Mary had both executed their Last Will & Testaments with another attorney about six years earlier, so John was not in danger of dying without a will. I had reviewed John and Mary’s wills at the beginning of the meeting. A few changes to how their charitable gifts in their wills were structured would have potentially reduced the tax bill of the estate, but otherwise their existing wills covered most of the bases. And assuming that Mary lived longer than John, it was not too late for her to update her will to take advantage of the potential tax savings.
But now, how was John’s family supposed to deal with John not having a power of attorney? Without this document, nobody could sign on John’s behalf. This would be a problem if, for example, John’s wife or daughter needed to withdraw funds from an account held only in John’s name or transfer the real estate that John and Mary owned jointly. In order to do this, they would need to file a petition for guardianship with the local court, have John declared mentally incompetent by a doctor, and have a judge appoint a guardian that could act on John’s behalf. This is generally not a pleasant or cost effective option.
Most of John and Mary’s financial accounts were owned jointly, so as long as Mary remained in good health and lived longer than John, they might not encounter too much difficulty. But if Mary would pass away before John, if they needed to sell their home, or if they would need to withdraw funds from John’s IRA account, then petitioning the court to appoint a guardian for John would be the only remaining option. I explained this to Mary and her daughter, and we discussed the best way to structure and manage their financial accounts going forward to deal with John not being able to have a power of attorney.
Near the end of the meeting, Mary was preparing to sign a durable power of attorney that would give authority to her daughter to take over her financial management in case Mary would also need help managing her finances. Just before signing the power of attorney Mary pulled a large brown enveloped out of her bag and asked, “What should I do with all these old papers?” I took the envelope, pulled a stack of documents out of it, and began looking through them. What joy! Among the papers was an original durable power of attorney document, made and signed by John! It was over ten years old, but it otherwise appeared to be validly executed and it gave authority to all the proper people to act on John’s behalf!
With this fortunate discovery, John and Mary’s world, and their children’s responsibilities, suddenly became so much simpler. Assuming that this ten-year-old power of attorney document would be accepted everywhere it was needed, no difficult and expensive guardianship proceeding would be necessary. There were no more concerns about needing to petition the court to appoint a guardian if Mary would pass away before John. What a relief!
Mary was very apologetic that she had not shown me the papers earlier, at the beginning of our meeting. While that would have made the last 90 minutes of discussion much simpler, I didn’t mind. I was just grateful that we had discovered John’s power of attorney before the meeting ended. Fortunately for them, they had planned ahead sufficiently that when the time came that they really needed a power of attorney document, there was one in their files, even though they didn’t realize it!
If they would have visited an attorney a few years earlier when John could think more clearly, they could have signed an updated power of attorney for John and updated their wills to maximize the tax savings from the charitable gifts specified in their wills. That would have been even better, but the fact that they had taken the steps to get proper estate planning documents drafted ten years ago would now save them and their family a lot of hassle.
This simple story illustrates an important point. We tend to wait to go out and get something until we need it. If we lead busy lives, sometimes it seems like only the urgent things get done. When it comes to getting a Durable Power of Attorney or other estate planning documents like a Last Will & Testament or a Health Care Power of Attorney, it is easy to keep putting it off until “later.” But when you or your family really need you to have a power of attorney, due to a mental illness or serious injury, it might be too late to get one. So plan ahead, and act while you still can.
This article was originally printed in the Plain Communities Business Exchange
Nevin Beiler is an attorney licensed to practice law in Pennsylvania (no other states). He practices primarily in the areas of wills & trusts, estate planning, and business law. Nevin is part of the conservative Anabaptist community and is committed to practicing law in a way that builds the Kingdom of God and is consistent with Anabaptist values. His office is in New Holland, PA, and he can be contacted by email at firstname.lastname@example.org or by phone at 717-287-1688. More information can be found at www.beilerlegalservices.com.
Disclaimer: This article is general in nature and is not intended to provide specific legal or tax advice. Please contact Nevin or another attorney licensed in your state to discuss your specific legal questions. In order to protect confidentiality and provide a better illustration, names in the above story have been changed and some facts may have been changed or added.