What is a Power of Attorney?
A power of attorney, often abbreviated as POA, is a legal document naming an individual to make legal decisions on behalf of another person (often elderly) while they are alive. The “principal” or “grantor” (typically the elderly individual) designates the “attorney-in-fact” or “agent” (usually an adult child) to legally act on their behalf in financial and / or medical matters. With a POA, the authority of the legal representative may be limited. This could mean the matters in which the attorney-in-fact has legal control are very specific or the agent only has authorization for a one-time action. On the other hand, other POAs give the attorney-in-fact a very broad range of authority. While attorneys and accountants can be named as the agent, it is common for relatives, particularly the adult children, of principals to be fill this role. Make note, creating a POA does not mean the principal no longer is able to make his / her own financial or healthcare decisions. Stated differently, as long as the principal remains competent, he / she can still make decisions on his / her behalf.
It is important to touch on the difference between a general power of attorney versus a durable power of attorney (DPOA). A general power of attorney, also called a non-durable power of attorney, regular power of attorney, or standard power of attorney, is effective immediately and expires when the principal becomes physically or mentally incapacitated. While a durable power of attorney, also called an enduring power of attorney, is also effective immediately, the legal representation by the attorney-in-fact continues even after the principal becomes incapacitated. There is also what is called a springing power of attorney or a conditional power of attorney, and in this case, the POA is not effective until a specific point in the future. The POA could be “sprung” (become effective) by an illness or a disability, resulting in the principal declared as incapacitated, usually by a physician. Examples of incapacitation may include Alzheimer’s disease and other related dementias, strokes, terminal illnesses, major accidents, and mental illness. Please note that the springing power of attorney is not a legal option in the state of Florida. However, there is one exception; if the springing power of attorney was created prior to October, 1, 2011.
POAs can be cancelled at any time, or the name of the attorney-in-fact can be changed, given the principal is competent to do so. Regardless of the type of POA, all POAs become ineffective upon the death of the principal.
Durable Health Care Power of Attorney
A durable health care power of attorney (HCPA), also called a durable power of attorney for health care, healthcare proxy, or medical power of attorney, legally designates an agent to make medical decisions on behalf of the principal if he / she is unable to do so himself / herself. The decisions in which the agent can make are quite varied and includes choosing the principal’s physicians and healthcare professionals, determining the types of healthcare that is received, such as in-home health care, surgery, and hospital care, choosing which medications are taken, and deciding if the principal will reside in a residential setting, such as an assisted living residence, an Alzheimer’s care unit (memory care), or a nursing home facility. It’s important to note that while the HCPA agent can make these medical care decisions, if he / she is not also the financial POA, the costs of long-term care and residential care must be approved by the financial POA (assuming the principal has the funds to cover the costs). In addition, a HCPA can take priority over a living will, which is a document that lays out a person’s end of life medical care preferences when an individual can no longer express his / her wishes. Examples include whether a person would like to be resuscitated, tube fed, or breathe with the aid of a machine. With a durable health care power of attorney, the principal has entrusted the attorney-in-fact to make decisions for him / her based on what he / she would have wanted could they communicate their wishes.
Durable Power of Attorney for Finances
Also called a financial power of attorney or durable power of attorney for asset management, the durable power of attorney for finances gives the attorney-in-fact the ability to make financial decisions on behalf of the principal. The tasks that an attorney-in-fact has the capacity to do are quite broad. For example, the agent may be able to file taxes on behalf of the person, manage and access their bank accounts and investment and retirement accounts, deposit checks, pay their bills, including in-home health care assistance and residential living expenses, file insurance claims, manage their property, sell their real estate, and apply for benefits, such as Medicaid, for them.
For management of VA financial benefits, a state’s durable power of attorney for finances is not sufficient. Rather, the VA has a fiduciary program, where a representative, generally chosen by the veteran, is named by the VA to manage a veterans VA benefits in the event that he / she becomes incapacitated.
As with the VA, a financial power of attorney is not recognized by the United States Treasury Department, and therefore, does not allow an attorney-in-fact to manage an incompetent principal’s Social Security benefits. Instead, there is a Social Security Representative Program. Persons can learn more here.
Medicaid Eligibility & Importance of Powers of Attorney
To assist a loved one in becoming eligible for Medicaid, maintaining their eligibility and making Medicaid-related benefit decisions, having a power of attorney is extremely important.
1. Without a POA, an adult child or another individual applying for Medicaid on behalf of their loved one may not be able to access the supporting documentation required by Medicaid during the application process. Medicaid applications require many financial and other supporting documents such as proof of income, assets, bank accounts and pensions.
2. If an elderly person becomes incapacitated and there is no POA, it may be necessary to go to court and pursue guardianship to gain legal authority of the incapacitated individual. This process may be very expensive and lengthy. The drawn-out process often means that a family must absorb the cost of caring for their loved one for an extended period of time when their loved one otherwise would have been eligible for Medicaid. Note, retroactive Medicaid may help to offset this situation, at least partially.
3. POAs can give family members the authority to hire a Medicaid planner, to gain financial eligibility when a Medicaid applicant has income and / or assets over the limit(s) in the state. Furthermore, the POA can allow family members to pay for Medicaid planning services using their loved one’s income or assets to further help them gain Medicaid eligibility.
4. POAs are also important when it comes to writing checks on behalf of a Medicaid recipient to cover required Medicaid co-payments or share of costs. For instance, for a single nursing home Medicaid recipient, all of his / her monthly income must be paid towards Medicaid care with the exception of a small personal needs allowance. Remember, when it comes to managing finances, a durable power of attorney for finances is required.
5. A durable health care power of attorney is also necessary for Medicaid purposes, which as mentioned previously, gives the agent legal authority to make long-term care and health decisions on behalf of the principal. As an example, a Medicaid-funded nursing home may wish to have someone make healthcare decisions for an incapacitated Medicaid care recipient.
How do I Create a Power of Attorney?
It’s important to mention that the person wishing to create the POA must be competent to make sound decisions. Therefore, it is best to create a POA long before there is any question about one’s competency. While all states allow some type of durable power of attorney, there is no “standard” form that is used across the United States. Therefore, one must use the correct form in the state in which he / she resides. Often, these forms can be found on state websites.
POAs must name the attorney-in-fact, the specific role(s) in which the attorney-in-fact will have legal control (i.e., health and / or financial authority), and the date or circumstance in which the POA will be effective. Please note, the laws regarding POAs vary based on the state in which one resides, which means the “procedure” for creating a POA is not consistent across the states. That said, POAs must be signed and dated, and most states require that POA forms be notarized by a notary public. (Basically, this means that an individual authorized by the court, a notary public, witnesses the signature of the principal and attorney-in-fact, then also signs the document, making it legal). In states that don’t require notarization, it can be beneficial to have the document notarized to prevent any potential questions about authenticity at a later date.
Certified copies of POAs should be given to the agent-in-fact, close family members (if desired), the family attorney (if applicable), banks, and other financial institutions in which the agent-in-fact will have authorization with which to act.
Do I Need an Attorney to Create a POA?
No, an attorney is not needed create a power of attorney, but as mentioned above, the forms and rules regarding the creation of a POA differs between states. Some people may choose to work with an attorney to ensure the correct form is used, the POA is correctly drafted, and that the legal procedure is accurately followed. Overall, hiring a lawyer might provide peace of mind for some persons wishing to create a power of attorney.
What Does it Cost to Create a POA?
There is a very minimal cost to creating a power of attorney document, particularly if one chooses to do it without the assistance of an attorney. POA forms can be found online and downloaded for free, or created via a website for $50 or less. If notarized, notary fees are generally $2 – $20 per signature. For those who choose to hire an attorney, the fee is higher than the “do it yourself” route, but all in all, the fee is generally still fairly minimal. Persons can expect to pay approximately $150 – $500.