Estate Planning Practice Blog

Do I Need a POA Over My Spouse?

The short answer: Yes.

Everyone needs to have a durable power of attorney (aka "POA") drawn up and effective just in case something happens. This is also true for spouses.

There are many things involving only one spouse where the other spouse would need a durable power of attorney to act on their spouse's behalf.

Think Social Security, car registration if in the name of one spouse, retirement accounts if in the name of one spouse, making a legal claim on behalf of an incapacitated spouse are all good reasons why even married couples need an estate plan that includes a durable power of attorney so that your other half can act for you.

So, what happens if you need a power of attorney over your spouse and he or she is already incapacitated? How do you get one? The answer: you don't. You have to petition the court to become your spouse's conservator and be subject to fees and costs plus court reporting requirements.

Estate planning is all about just-in-case scenarios. Sort of the same reason why you keep band aids (and for those who are really prepared, a fully stocked first aid kit) at home -- just-in-case someone gets a minor cut or other injury.

Are You Acting Pursuant to a Power of Attorney?

Just a reminder to keep comprehensive records if you are acting as an attorney-in-fact under a power of attorney in California. For every action you take on behalf of another person as that person's attorney-in-fact, you must keep records of all of your transactions.

California Probate Code Section 4236, subdivision (a) requires “[t]he attorney-in-fact shall keep records of all transactions entered into by the attorney-in-fact on behalf of the principal.” 

Please seek the advice of counsel if you are executing a power of attorney or acting pursuant to a power of attorney. It is an important legal document.

Those Fill In The Blanks -- A through N Isn't Enough.

Many notaries and office supply stores have those fill in the blank powers of attorney forms for you to complete without the advice of an attorney.  Here is a sample of the form that allows you check off letters A through N.

Sure, the form is only 2 pages long with information on both sides of the page and contains the standard powers -- banking, taxes, real property, etc.

But there are some powers that must be expressly stated or completely spelled out to be valid. And these standard fill in the blank forms either don't offer the choice or have room to completely spell out the additional powers that the California Probate Code requires to be completely spelled out. In these instances, checking the letter Q will not work.

One such power that is often omitted in a fill in the blank power of attorney, but can become very important is the power to create, modify or revoke a trust. See California Probate Code Section 4264. Further, Section 4264 lists other powers that must be specially enumerated or "expressly authorized" to be valid in a power of attorney.

For this reason, it is wise to have your power of attorney drafted by an estate planning attorney that can prepare a "long form" power of attorney to include specially enumerated powers important to make your estate plan complete.

Asking Your Attorney-in-Fact.

So you want to prepare a power of attorney? This is a document that names someone else to act as your behalf with regard to financial affairs. It is an important legal document and you are trusting your affairs to someone else.

A power of attorney is usually effective upon your incapacity where two medical doctors or the court must state that you are unable to manage your affairs. Some people will create a power of attorney that is effective immediately. This may be useful if you need someone to manage your affairs while you take a month long vacation out of the country.

A power of attorney that has the word "durable" in front of it or within the document means that the power of attorney is also effective when you are incapacitated. How this works is that you create a power of attorney effective immediately and then later you become incapacitated then this power of attorney remains valid.

One thing that people forget when they prepare their power of attorney to ask their suggested attorney-in-fact, the person you wish to name to act on your behalf, if they are willing to act for you.

Ask first and then prepare!

Some people are adverse in dealing with other people's financial affairs, some people live too far away and some people have their own families to care for whether it be their elderly parents or young children.

Naming Attorney in Fact for a Power of Attorney.

Clients generally have  hard time naming or nominating attorney in facts for their durable power of attorney.

Remember, a durable power of attorney is an important legal document that allows someone else to manage your financial affairs while you are still alive, but either unavailable or not doing well. It is either effective immediately or upon your incapacity.

An attorney in fact is someone you choose to act on your behalf.

So, if you are naming your spouse or partner as your attorney in fact, who should you name as a back-up? Some folks name their adult children. Some folks name other loved ones.  Some folks name another trusted individual like their CPA or financial advisor.

Regardless of you who nominate, it is wise to consider nominating individuals who live near you.

Recent case in point:  Client is not doing well. His durable power of attorney nominates his cousin who lives in New Jersey. Client is in hospital in Long Beach. His cousin in New Jersey is too busy, swamped and otherwise unavailable to assist client with immediate management of his financial affairs. Client's family who lives nearby wishes that client nominated someone much closer to handle his financial affairs. It's something to think about.

Useful Durable Power of Attorney Provision.

Most standard Durable Powers of Attorney prepared should have an enumerated power for someone to act on your behalf regarding your right to receive proceeds from a trust, estate or other related beneficiary transaction. 

How this works:

Let's say you are disabled, incapacitated or recovering from an illness and you are now the beneficiary for someone else's trust or estate with issues requiring your attention.

For example, your interest as a beneficiary in someone else's trust or estate is being compromised or is not handled properly. You can have your attorney-in-fact under your Durable Power of Attorney handle all matters involving your interest as a beneficiary to include but not limited to receiving funds, requesting funds and handling lawsuits on this matter.

Thus, a Durable Power of Attorney is a very powerful document. It's something that everyone should have in place. This power is one of the many powers enumerated in a Durable Power of Attorney. Remember, your Durable Power of Attorney can be effective immediately or upon your incapacity as determined by a court or two licensed medical doctors.

This is what the enumerated power should include:

1.9. Estate, Trust, or Other Beneficiary Transactions. I give my attorneys in fact all of the powers listed below in this paragraph so that my attorney in facts may act for me in all matters that affect a trust, probate estate, guardianship, conservatorship, escrow, custodianship, or other fund from which I am, may become, or claim to be entitled, as a beneficiary, to a share or payment, whether such matters deal with property located in this state or elsewhere. The powers described in this paragraph do not include the power to create, modify, or revoke trusts.

(a) Payments. Accept, reject, disclaim, receive, receipt for, sell, assign, release, pledge, exchange, or consent to a reduction in or modification of a share in or payment from the fund.

 
(b) Claims. Demand or obtain by litigation or otherwise money or other thing of value to which I am, may become, or claim to be entitled by reason of the fund.

 
(c) Participation in Proceedings. Initiate, participate in, and oppose litigation to ascertain the meaning, validity, or effect of a deed, will, declaration of trust, or other instrument or transaction affecting my interest.

 
(d) Removal of Fiduciary. Initiate, participate in, and oppose litigation to remove, substitute, or surcharge a fiduciary.

 
(e) Investments and Disbursements. Conserve, invest, disburse, and use anything received for an authorized purpose.

 
(f) Transfer to Revocable Trust. Transfer an interest of mine in real property, stocks, bonds, accounts with financial institutions, insurance, and other property to the trustee of a revocable trust created by me as settlor.

 
(g) Contingent Interests. Convey or release any contingent or expectant interests in property, including marital property rights, and any rights of survivorship incident to joint tenancy or tenancy by the entirety.

 
(h) Probate Code Section 13502 or 13503 Election. Make any election or election and agreement referred to in California Probate Code Section 13502 or 13503.

Estate Planning Documents A La Carte?

Estate planning when it is all set and done is often a variety of documents prepared in accordance to your wishes and financial situation that work in conjunction with each other to accomplish a variety of objectives.

Sometimes you may only need one or two documents prepared as a stop-gap measure before you are able to deal with the larger estate planning concerns for your family.

Obviously, the largest barrier to estate planning for most Americans involves money. Most Americans don't have enough money in their checking account to write a check for a grand or two to an attorney for estate planning documents without budgeting for it.

One way to get around this is to ask your attorney if he or she would be willing to prepare estate planning documents a la carte.

Here are some ways this can work:

• You are leaving for a two week trip to Europe. You want to name someone to manage your financial affairs while you are out of the country. And, better yet, you want this power to be effective for only the month of October. A Durable Power of Attorney with an expiration date of midnight, October 31, 2006, would accomplish this. [An expiration date of midnight, October 31 would truly be a witching hour.]
  
• You find yourself communicating with a loved one's doctor for a recent medical condition. Your loved one is having a hard time understanding their treatment options and want you to get involved. Your loved one can appoint you as their agent in their Advance Health Care Directive. This Advance Health Care Directive can be effective immediately.
  
• You have a minor child. You and your spouse are worried about who would be named guardian for your minor child if something happens to you and your spouse at the same time. You can draft a Will with testamentary trust provisions to nominate guardians for your child and put it place a trust to be formed if you and your spouse passed away.

One document alone does not make a proper estate plan, but it is important to realize that each document has different objectives and can be prepared independently.

Most attorneys charge a flat fee to prepare these kinds of documents. The flat fee is usually equivalent to one hour of the attorney's normal hourly rate.

Can I Be Barred From Handling My Own Affairs?

The law requires that you have sufficient mental capacity to handle your own affairs. This includes making medical decisions for yourself and to entering into contracts for example.

To ensure that your affairs will be handled the way you want if you lose capacity, whether permanently or temporarily, you can prepare a power of attorney for finances. A durable power of attorney can be effective immediately and continue through your incapacity. You can also prepare a power of attorney that is effective upon your incapacity as determined by two medical doctors or the court.

You can also prepare a power of attorney for healthcare, which is now called an advance health care directive. This document allows you to appoint someone to make medical decisions for you in the event you are unable to do so.

If you prepare a revocable Living Trust, you can name a successor trustee to manage your trust assets in the event of your incapacity. Most people transfer title of their home into their trust so your successor trustee would be able to manage all aspects of your home for you.

If you have not made any arrangements such as I have described above, the court may appoint a conservator to act on your behalf. Nearly anyone can petition the court to become your conservator if they can show that you no longer have capacity to manage your affairs.  I hope I don't have to say that this is the worst case scenario.

Cute Story About A Pair of Elderly Clients.

I received a phone call today from a couple in their early eighties. Nice couple actually. I spoke to her and then he got on the phone. They wanted a durable power of attorney prepared.

They assured me that they already had their Wills and a Living Trust already prepared. I believe them as their property tax bill says that the owner of their property is their Living Trust.

She asked me how much it would be to have me prepare a Durable Power of Attorney. I gave them my best quote based on their referral source. I said $75 for two Durable Powers of Attorney and included two free notarizations of their signature ... and ... that I would make a home visit.

Home visit? Whoa!

Yeah, they lived one block over from me.  But that's not the cute part of the story.

The lady said to me over the phone in a high voice: SEVENTY FIVE DOLLARS????

After a pause on my end... I truly didn't know what to say -- so I said, " is that too high or too low?"  They were nice on the phone and I had to jump start the conversation again somehow.

She replied, "too high ... I should only pay $5 for a power of attorney."

That made me laugh! I said, you know what, I will prepare one for you for a lesser amount of money and we'll call it even. She agreed. The husband agreed later that they could have afforded to pay me more, but then I just said no -- just give me a referral to even it out someday. And we shook hands on that.

I am still smiling thinking about them. They made my day -- hard hagglers, them two.

Taxes and Durable Powers of Attorney.

I wrote about Durable Powers of Attorney a while ago. Read it here.

It is now tax season.  I have had a slew of clients ask me [well, not a slew, but more than a few to make mentioning it here useful to others] how to prepare or complete tax returns for their aging parents.

My answer is you really can't unless you have a Durable Power of Attorney allowing you to take care of your parents' taxes.  Having a Durable Power of Attorney in place for your aging parents is always a good idea.

But be careful. Your parents may not want to name you to manage their financial affairs while they are still able. Or they may have someone else in mind. If so, their wishes need to be respected.

At any rate, encourage your parents to seek the advice of an attorney or paralegal service to have proper Durable Powers of Attorney prepared.