Tuesday, November 24, 2009

Benefits and Drawbacks of a Power of Attorney


A power of attorney is the least expensive and least complex of the methods for appointing a surrogate decision maker. Although the law allows the agent to enter financial transactions for the principal, the law requires that the power be used only for the benefit of the impaired person. Terms contained in powers of attorney vary widely, but normally they do not permit the agent to give away the principal's money or use money for the agent's own benefit. Financial powers of attorney are commonly used by family members to contract for long term care, pay the elder's bills, and apply for government benefits.


In elder care the power of attorney has three serious drawbacks. First, it must be signed when the impaired person still has the intellectual capacity to understand the document's terms and consequences. Often, the elder has declined so far before the problem is recognized that it is already too late to get one signed. Second, no law requires banks and other financial institutions to recognize the validity of the document. Banks, stock brokers and others in the financial world often refuse to recognize a power of attorney unless it is on their standard form or signed in their offices. If this happens, the agent may not be able to get access to the impaired persons money in order to use it for health care. The third drawback is that there is no oversight of the agent. Elder financial abuse is a serious problem. Law enforcement in Oregon has thousands of cases in which powers of attorney have been used by unscrupulous relatives to misappropriate the life savings of an elderly family member.

Sunday, November 22, 2009

The suffering of the dutiful daughter

Nursing homes, adult foster homes, and assisted living arrangements are the public face of long term care for the elderly. In the real world, however, most long term care is performed by families. When there are siblings charged with taking care of a parent the duty usually falls upon the eldest daughter. This is statistically true across cultures and across generations. It is true even when a younger daughter or a son might be the more qualified care giver, a fact that often leads to strife among the siblings. In my own family, I have seen a younger daughter chafe under the injustice of seeing her parent and the other children all looking to the older sister for leadership regarding care issues, ignoring the superior capabilities of the younger. It isn't fair, and it isn't likely to change.

More often than not it is the oldest daughter who comes to me to say that the family can no longer handle the pressures of providing long term care. The crises is often the direct result of  increasing levels of dementia in the elder--loss of cognitive ability that makes the elder increasingly incapable of cooperating in her own care. In these cases the daughter faces asking the court to appoint her conservator to take control of the parent's money and use it for the costs of professional long term care. When I explain the process for becoming a conservator, I must also explain the curse of the dutiful daughter.

It is not unusual, I  explain, that the one person willing to stand up and protect the elder ends up hated by everybody. A court proceeding is public, intrusive and embarrassing for the elder. The dutiful daughter--the only member of the family willing to step up and do the right thing--ends up hated by the parent because he or she cannot see through the fog of dementia that the proceeding is meant to help. Other family members turn on the dutiful daughter as they see the parent's money being locked away to be used only for the long term care needs of the elder. Family members who have been using that money as if  it were their own will not be above holding a grudge against the person responsible for bringing the gravy train to a stop.

Relatives, whether or not they be dutiful oldest daughters, seldom refuse to proceed with court action out of fear of the curse, but it is important that they be steeled for it before we sign the papers.

Saturday, November 21, 2009

How useful is a power of attorney in real life?

Most people include a power of attorney as part of their estate planning packet. A power of attorney prepares a person for disability by nominating an agent to take care of financial matters if the principal (the person signing the power of attorney) becomes unable to manage his or her own affairs. I have a power of attorney naming my wife as my agent to take care of my finances if I am too ill to take care of them myself. My elderly mother has signed a power of attorney naming me as her agent in case she becomes disabled and can no longer handle her financial affairs. If the power of attorney works as planned, I will step in when my mother can no longer manage her money and I will make the financial decisions she would have made if she had not become disabled. The power of attorney, a relatively inexpensive document, is designed to save a family the stress and cost of going to court to have a formal conservator appointed. But does this work?

I have struggled with explaining how the power of attorney operates in the real world. I used to tell people that it works on a sliding scale. At the low end of the scale, a power of attorney works nearly every time. In the middle it works about half the time, and at the high end it seldom works. Social service agencies are at the low end. If you are the child of a Medicaid applicant with a power of attorney from your parent, the agency will probably give the document only a passing glance before accepting you as the agent. One of the reasons for this liberal attitude is that you are trying to get money for the elder, not from the elder. Society is not going to leave needy elders homeless, because of some defect in the language of a power of attorney.

I tell people that banks are somewhere in the middle of the scale. If I walk into a bank holding a power of attorney signed by my mother and want to take money from her accounts, my chances of being successful are about fifty-fifty. Banks are unpredictable. One day I might get the money with no problem. Another day, even at the same branch of the same bank, the manager might tell me they have to send a power of attorney to the legal department for analysis. Power of attorneys that go to legal departments often disappear there, never to be seen again.

At the high end of the scale sit brokerages. The chances of me getting into my mother's brokerage account with a power of attorney written by a local lawyer (or worse, a form from Office Depot) are between slim and none. If my mother wanted me to have a power of attorney that would work at her brokerage, she should have signed one of their forms, in their office, in front of their notary. I can't say a brokerage will never honor an outside power of attorney. I will promise, however, that the document will spend a fair amount of time being examined by the brokerage's lawyers before it is honored.

I knew this was how power of attorneys worked, but had a hard time explaining why. Then a Corvallis lawyer named Steven Heinrich put it in a way that I think makes it clear. He once pointed out that a power of attorney is an invitation to agencies, banks, and brokerages to accept the agent as authorized to handle the assets of the principal. Some institutions accept the invitation. Others will not. Government agencies are inclined to accept the invitation; banks accept it now and than; and brokerages most often decline. In the case of my mother and me, neither of us can force her bank or anyone else to accept the power of attorney. She agreed that I can act for her when she signed the document, but that is only half the equation. Only when the bank or other third party agrees to honor her wishes does the power of attorney become truly effective.

So what does this mean to someone planning for disability or worried about the impending disability of a parent. The short answer is that one should not put too much reliance on a power of attorney. It is like a seat belt. It may save your life in certain kinds of crashes, but having it on will not protect you from the consequences of your reckless driving. Planning for disability and death requires a plan, not a document. The power of attorney can be part of a plan, but not a substitute for it.