As many seniors have found out, getting to the bank and handling financial tasks becomes more difficult as they age. Oftentimes, they no longer enjoy or want the responsibility of keeping track of bills or other financial obligations that crop up on a monthly or annual basis.
In some cases, they’re experiencing memory loss or other cognitive or physical impairments that impede mobility and make it difficult to remain focused on matters related to finances, medical affairs, and planning for the future.
For those reasons and more, it’s important to have someone named who can help in the event you need the support, as we all do sometimes. This is where setting up a Power of Attorney (POA) can prove beneficial to make things more manageable for seniors, their adult children, and caregivers.
In this article, we will provide you with a comprehensive guide on understanding, setting up, and utilizing a Power of Attorney effectively in elder care planning. You’ll learn about the POA process and its scope and limitations under Ohio law.
Most importantly, you’ll learn why it’s one of the most important estate planning tools you should consider putting in place now while you are competent to do so.
Understanding Power of Attorney
Simply stated, a Power of Attorney is a legal document where an individual (the principal) appoints another person (the attorney-in-fact or agent) to act on their behalf.
There’s more than just one type of Power of Attorney available for elder law purposes. These include general, limited, medical, financial, durable, and springing Powers of Attorney.
Let’s see how each works and how they are used in elder care planning.
General Power of Attorney
A General Power of Attorney is a comprehensive legal document that grants an agent — the person you appoint — wide-ranging powers to manage your affairs. This is often used when the principal, the person who creates the Power of Attorney, anticipates their absence or incapacity or simply wants someone else to be able to step in if they ever need the help.
Here are some of the specific powers a General Power of Attorney may confer:
Managing Financial Transactions
This could involve handling banking transactions, operating accounts, dealing with investments, paying bills, filing taxes, managing retirement benefits, and handling other financial matters on behalf of the principal.
Buying Life Insurance
The agent can buy, manage, or change life insurance policies as required, ensuring the principal’s intentions are carried out and their beneficiaries are protected.
Settling Claims
If there are any claims, such as from insurance policies or legal disputes, the agent is enabled to negotiate and settle these on behalf of the principal.
Operating Business Interests
If the principal owns a business, the agent can make decisions related to its operation. This can involve everything from daily management to significant decisions like mergers, acquisitions, or sales.
Making Gifts
The agent can make charitable donations or gifts on behalf of the principal as long as they align with the principal’s documented wishes or past behavior. This language is not included in all POAs, so it’s important to review your document to ensure this is included!
Employing Professional Help
The agent can hire professionals such as an elder law attorney, financial expert, insurance provider, or other experts to assist with the principal’s well-being and management of their affairs.
As you can see, a General Power of Attorney can give the agent broad authority over a host of activities, especially those related to financial and medical decisions.
It’s important to note that despite the wide powers a General Power of Attorney confers, the agent is legally obligated to act in the principal’s best interest, maintain accurate records, and avoid conflicts of interest. Misuse of a Power of Attorney can lead to legal penalties.
It’s always recommended to consult with a legal professional when setting up any type of Power of Attorney to ensure your interests are properly protected and the legal documents are sound and binding.
Limited Power of Attorney
A Limited Power of Attorney grants the appointed agent specific powers or authority to act on behalf of the principal. Unlike a General Power of Attorney, which confers broad powers, a Limited Power of Attorney is used for a specific purpose or time period.
In the context of elder care and estate planning, a Limited Power of Attorney can be highly useful in certain situations. Here’s how it works:
Specific Authority
The principal outlines specific tasks or decisions that the agent is authorized to manage. This could be anything from selling a specific property, managing a particular investment, or making healthcare decisions during a predetermined period when the principal may be incapacitated due to surgery or illness.
Time-Bound
The Limited Power of Attorney can be set to expire after a certain date or event. For example, a senior might set up a Limited POA allowing a relative or agent to manage their financial affairs while they are on an extended vacation or recuperating from a medical procedure.
Limited Scope
The Limited Power of Attorney only grants the agent the power to act within the parameters set by the principal. The Limited Power of Attorney only grants the agent the power to act within the parameters set by the principal. For instance, the agent cannot make decisions or take actions outside the defined scope of the POA. This can offer the principal peace of mind, knowing that their affairs are being handled according to their very specific wishes.
In terms of elder care and estate planning, a Limited Power of Attorney can encompass tasks such as:
A Limited Power of Attorney offers a level of control and specificity that can be beneficial in elder care planning. It allows seniors to delegate certain tasks while retaining control over other aspects of their affairs. As with any legal document, it’s important to consult with a legal professional to ensure a Limited Power of Attorney aligns with the individual’s overall care and estate plan.
Medical Power of Attorney
A medical power of attorney, also known as a health care proxy, is a document granting legal permission for a chosen individual to make healthcare decisions when someone is unable to. This individual, known as an agent, gains the authority to make decisions only after a physician has formally confirmed that the person can’t make key decisions independently.
This is most commonly used if someone is in an accident and temporarily incapacitated or if someone has been deemed incompetent to make decisions for themselves. By having a Medical Power of Attorney, you can generally avoid needing a court-appointed guardianship.
The document is also sometimes referred to as a durable power of attorney for healthcare. It’s advisable to prepare a living will alongside it, providing treatment preferences for the agent to adhere to.
Financial Power of Attorney
A financial POA is often referred to as a General Power of Attorney because of its comprehensive nature. It is a legal instrument that empowers a trusted individual to manage your financial affairs, which can range from simple tasks to more complex financial decisions.
For instance, if you’re unavailable due to travel, your agent can handle your financial transactions, such as paying bills or managing your investments. In case of sudden illness or incapacitation, having a financial power of attorney ensures that there’s someone ready to step in and manage your financial affairs seamlessly.
The agent’s responsibilities under a Financial Power of Attorney may include but are not limited to managing your bank accounts, paying your bills, handling investments, buying or selling real estate, filing and paying taxes, and signing legal documents on your behalf.
Springing and Durable: Two Common Powers of Attorney
Two of the most common Powers of Attorney are Durable and Springing. While both documents allow your agents to handle your financial affairs for you, they take effect at different times.
Springing Power of Attorney
This document gives your agent authority to act on your behalf only if and when you are deemed medically unable to make financial decisions for yourself. A Springing Power of Attorney, then, generally comes into effect under certain circumstances related to your health, usually at the onset of a disability or illness.
When someone is deemed as unable to make their own decisions, your agent can then step in to help make financial and/or health care decisions for you.
Once you’ve recovered and can make your own decisions again, your agent may no longer make financial decisions for you.
Durable Power of Attorney
A Durable Power of Attorney gives your agents the authority to act on your behalf starting from the moment the document is signed. The only way your agents may lose that ability is if you draft a new Power of Attorney and remove their authority or you revoke your Power of Attorney altogether.
While springing POAs are sometimes used in elder care planning, the fact that the power granted to agents in a durable Power of Attorney goes into effect immediately and does not go away after a certain time makes it a type that is most often used in elder law.
The Role of the Attorney-in-fact or Agent
Under Ohio law and in the realm of elder care planning, the terms “agent” and “attorney-in-fact” are often used interchangeably. However, they have distinct meanings and responsibilities.
An agent can be anyone the principal trusts — a family member, a friend, or a professional like an attorney. He or she is legally obligated to act in the principal’s best interest and cannot make decisions that go against their wishes.
The extent of an agent’s authority can be broad or narrow, depending on the principal’s directives. It’s crucial to note that an agent’s actions hold legal weight for the principal. Agents are held to a fiduciary duty, meaning they must act in the best interest of the principal.
On the other hand, an attorney-in-fact is an individual appointed explicitly through a Power of Attorney document to act for the principal. This role is formalized through a legal process, often requiring notarization or meeting other legal criteria. The attorney-in-fact’s powers and limitations are explicitly spelled out in the Power of Attorney document.
Setting up a Power of Attorney
Setting up a Power of Attorney can differ based on the type of Power of Attorney you’re establishing. The general steps are as follows:
Select an Agent
Start by picking someone you trust to act as your agent. This individual will take responsibility for making decisions on your behalf if you’re unable to do so.
Decide on the Power of Attorney Type
Several types of POAs exist, such as durable, springing, financial, and medical. It’s essential to choose the kind that aligns with your requirements. It is important to speak with an elder law attorney to determine the right type (or types) of Power of Attorneys that are right for you.
Creation of the Document
You will want to work with an Elder Law Attorney to draft a Power of Attorney that is going to fit your needs. Based on your age and your goals, there may be specific powers that need to be included in or removed from your Power of Attorney.
There are options for obtaining a Power of Attorney online without the oversight of a licensed Ohio Attorney. If you choose to go this route, it is important to review the powers that are being given to your decision-makers. The Ohio Statutory POA form lists more activities that your attorney-in-fact can’t do on your behalf than what they can do – which can tie their hands in the event they need to act on your behalf due to incapacity. If that happens, and they don’t have the powers they need to manage your affairs, they may be forced to obtain guardianship through the court in order to help you.
Sign the Document
Once your document is ready, you’ll need to sign it. This may need to be done in front of a notary public or another authorized individual who can bear witness to the signing, depending on the type of Power of Attorney being drafted. When working with an attorney, they will usually have a Notary Public available to assist you in this process.
Share Copies
Lastly, distribute copies of the completed Power of Attorney to your agent, healthcare providers, and any other parties that might need to know its existence.
It’s important to be aware that POA laws can be intricate, and setting one up can take some time. Therefore, it’s advisable to consult with a legal professional to ensure your POA is legally sound and accurately reflects your specific needs.
Revoking a Power of Attorney
Revoking a Power of Attorney is a significant and sometimes necessary action. A Power of Attorney can be revoked or withdrawn at any point as long as the principal is mentally competent and able to make such a decision.
Here’s an expanded explanation of this process:
Writing a Revocation Letter
The first step in revoking a POA is creating a formal revocation letter. This letter should clearly state the principal’s intent to revoke the powers granted to the agent. It should include details such as the date of the original POA, the agent’s name, and the principal’s decision to revoke the authority given.
Notifying the Agent and Relevant Parties
The principal should promptly notify the agent about the revocation. It’s also crucial to inform any relevant parties. This could include financial institutions, healthcare providers, and any entities or individuals who received a copy of the original Power of Attorney. Immediate notification can help prevent any further actions taken under the revoked POA.
Retrieving Copies of the Power of Attorney
To avoid potential misuse of the document, the principal should make every effort to retrieve all distributed copies of the revoked POA. This includes copies held by the agent, financial institutions, healthcare providers, family members, or attorneys.
Recording the Revocation
In some cases, especially if the Power of Attorney was recorded with a local or state government office (common with property-related POAs), the revocation should also be recorded in the same manner to ensure legal validity.
Creating a New POA (If Needed)
If the principal still wishes to have a Power of Attorney in place, they should consider creating a new POA document after revoking the old one. This could involve appointing a new agent or adjusting the powers granted.
As with creating a Power of Attorney, revoking one involves serious legal decisions, and consulting with a legal professional is recommended to ensure the revocation is properly executed and legally sound.
Common Misconceptions About The Power of Attorney
There are several misconceptions about the Power of Attorney, and understanding the realities can help individuals make informed decisions. One widespread misunderstanding is the belief that a Power of Attorney grants the agent unrestricted authority over the principal’s affairs. This is not the case.
While a Power of Attorney does grant the agent the power to make decisions on the principal’s behalf, it is not an unrestricted license to do as they please. The agent is legally obligated to act in the best interest of the principal, making decisions that align with the principal’s wishes and welfare.
They cannot use the POA to act against the principal’s interests or to benefit themselves. Misuse of the powers granted can lead to legal penalties.
Another common myth is that a Power of Attorney remains in effect even after the principal’s death. In reality, the POA automatically becomes void when the principal passes away. The rationale behind this is that a Power of Attorney is a representation of the principal’s decision-making abilities, and these can’t be exercised once the principal is deceased.
At the point of death, the trustee of the principal’s trust, the executor named in the principal’s will, or an administrator appointed by the court takes over the management of the deceased’s estate.
Clearing up these misconceptions is crucial to understanding and effectively using a Power of Attorney. In all cases, the principal’s rights and interests are of paramount importance, and legal structures and regulations are in place to ensure these are upheld.
The Importance of a Power of Attorney in Elder Care Planning
A Power of Attorney is a crucial component of elder care planning. As aging individuals and their families grapple with factors such as Alzheimer’s disease or other forms of cognitive decline, the possibility of becoming unable to make important financial and medical decisions independently increases.
Two main types of Powers of Attorney most relevant to elder care are the Financial Power of Attorney and the Medical Power of Attorney.
A Financial Power of Attorney allows the agent to make financial decisions immediately and also in the event that the principal becomes mentally incapacitated. A Medical Power of Attorney, also known as a health care proxy, empowers the agent to make health care decisions for the principal if they become mentally incapacitated. This can encompass decisions about medical treatment and other aspects of healthcare that the principal would otherwise make themselves.
In many cases, an adult child is designated as the attorney-in-fact, acting on their parent’s behalf. This arrangement can provide peace of mind for both the parent who creates the POA and other family members. By knowing that someone trusted is legally authorized to make decisions in line with the parent’s wishes, the family can focus on providing support and care.
However, it’s important to note that setting up a POA should be done with the guidance of a professional, such as an elder law attorney or an estate planning attorney. These legal representatives can help ensure that the Power of Attorney is valid, that the correct type of POA (durable power, healthcare power, etc.) is chosen based on the individual’s needs, and that the document accurately reflects the parent’s wishes.
For further understanding and professional help, consider reaching out to the elder law attorneys at Jarvis Law Office. By understanding its purpose, appointing the right agent, and setting it up correctly, you can ensure your affairs are managed as per your wishes.
Remember, planning for the future is not just about securing your interests — it’s about ensuring the peace of mind and ease of transition for your loved ones as well.
At Jarvis Law Office, we protect Ohio seniors and those who love them. We understand the importance of aging with dignity and on your terms. We offer FREE consultations, in-person workshops, and monthly webinars for Ohio seniors and their families.
With locations in Lancaster, Dublin, and St. Clairsville, contact us at (740) 721-3158 or complete our online form to schedule your consultation. You’ve worked hard all your life for your savings. Let’s work together to ensure your savings stay in your hands.
Copyright © 2023. Jarvis Law Office, P.C. All rights reserved.
The information in this blog post (“post”) is provided for general informational purposes only and may not reflect the current law in your jurisdiction. No information in this post should be construed as legal advice from the individual author or the law firm, nor is it intended to be a substitute for legal counsel on any subject matter. No reader of this post should act or refrain from acting based on any information included in or accessible through this post without seeking the appropriate legal or other professional advice on the particular facts and circumstances at issue from a lawyer licensed in the recipient’s state, country, or other appropriate licensing jurisdiction.
Jarvis Law Office, P.C.
904 N. Columbus Street
Lancaster, OH 43130
(740) 721-3158
https://www.jarvisfirm.com
