Why planning ahead is essential
Sometimes, as our parents age, we notice that they might become more confused or forgetful. While this is typical in the aging population, sometimes this means that our parents are becoming unable to manage their own finances and affairs. It is often at this point that caretakers realize a Power of Attorney might be necessary.
A Power of Attorney is a legal document that allows one person (the “Principal”) to appoint another person (the “Agent”) to handle his or her financial affairs. Signing a Power of Attorney gives the Agent authority to make financial decisions on the Principal’s behalf, including signing contracts, taking out loans and mortgages, selling real estate, and transferring assets. The Power of Attorney with a Statutory Gifts Rider, allows the agent to make gifts on behalf of the Principal, which can be essential for Medicaid planning. For example, if the Principal needs nursing home care, the Agent can make asset transfers on his or her behalf in order to attain Medicaid eligibility.
Because the Power of Attorney can give the Agent tremendous authority, it is important that the Principal has the mental capacity to understand the document as well as the powers given to the Agent. In fact, a valid Power of Attorney cannot be executed if the Principal does not generally comprehend the provisions of the document. Unfortunately, many neglect this crucial planning document until there is an acute need for it, such as when Medicaid planning is necessary, at which point the individual may lack the requisite capacity to execute a Power of Attorney. If that is the case, then a Guardianship proceeding would have to be commenced in court in order for a family member to obtain legal authority to handle financial matters on behalf of the incapacitated individual.
For this reason, we encourage our clients of all ages to consider Powers of Attorney long before there is a crisis or a need for nursing home care. Clients can designate a person they trust, usually a spouse or immediate family member, to act on their behalf in the event they are unable to do so. These documents can avoid costly legal proceedings to establish Guardianship in the event Medicaid planning or other action is needed down the road.
The experienced team of attorneys at Ansanelli Law Group, LLP, would be pleased to speak with you if you have any questions about a Power of Attorney or your estate planning or elder law concerns.