People who have full mental capacity can change their estate planning documents at any time by executing new documents. The reasons for creating new documents may range from new personal preferences to fixing technical problems. In time, however, an individual may lose legal capacity to execute new documents.
One particular problem area can involve individuals with some form of dementia and powers of attorney.
An issue that may need to be addressed by a new power of attorney may be that the old power of attorney may not have enough powers to fully protect an individual’s assets. Basic financial powers of attorney, such generic power of attorney forms, often only allow for a representative to pay bills and make other basic financial transactions. These basic powers often do not allow for representatives to make larger planning decisions, such as whether or not to move assets into an asset protection trust to protect against future nursing home costs.
A second problem may arise if an individual moves to a new state where their old power of attorney is no longer valid. Powers of attorney are governed by state law. A power of attorney valid in one state may not be valid in a different state. So even if an individual has what would be a fully complete power of attorney in one state, if the individual moves to a new state, the old power of attorney may be completely worthless.
What happens when either a valid power of attorney is insufficient or invalid in a new state and an individual no longer has the capacity to create a new power of attorney? The individual’s family will then have to go through lengthy and expensive guardianship procedures in order make decisions on behalf of an incapacitated individual. Even if the guardianship procedures are successful, guardianship may require regular reports to be filed with courts. Some states also do not allow for certain planning decisions to be made under guardianship. Both of these restrictions could be avoided with a complete, valid power of attorney.
The solution to potentially incomplete powers of attorney is to only have powers of attorney drafted by an experienced elder law attorney. An experienced elder law attorney can carefully tailor a power of attorney to an individual client’s needs and ensure it fits in with a client’s larger estate plan. If individuals move to a new state they should seek to have their planning documents reviewed by an elder law attorney licensed in their new state to make sure the documents are still valid.
To create, or review, your power of attorney, please call Martha C. Brown & Associates at (314) 962-0186.