A General Lasting Power of Attorney (GDPOA) is often suggested as a way to avoid guardianship or “living probate”. While such documents are an important tool in comprehensive estate planning, the GDPOA alone, or in conjunction with a will alone, may not provide the protections that the framer seeks.
A GDPOA is a legal document that allows a “principal” to appoint another person (an “agent” or “agent”) to represent the principal in the principal’s business and financial affairs. This document is intended to assist when the principal is unavailable or the principal may be physically or mentally unable to conduct business. Since the document is “durable,” it will continue to be valid even if the settlor becomes legally incapacitated. To be valid for real estate transactions, the GDPOA must be recorded with the county clerk’s office where the property is located. A GDPOA differs from a healthcare power of attorney and a limited power of attorney by its broad scope and application to a wide range of financial matters.
A non-durable power of attorney does nothing to help plan for disability, incapacity, or incapacity, or avoid guardianship (if any). A non-durable power of attorney expires when the settlor becomes incapacitated or incapacitated. Therefore, of the different forms of power of attorney available, the GDPOA is the most promising for planning for disability, incapacity or incapacity.
But in practice, the GDPOA can be very weak and ineffective. Although powers of attorney are very common and the concept of the GDPOA has become very popular, the attorney holding the power of attorney document is not always considered to be on the principal’s side. Individuals and institutions will often reject the GDPOA upon submission. Elderlaw attorney Scot Selis wrote on SeniorLawToday.com:
“If you have ever been frustrated by an organization refusing to honor a durable power of attorney, you are not alone. A power of attorney allows an individual to choose another person or persons to handle their financial affairs. However, many financial institutions often refuse to honor a properly signed and Witness the Power of Attorney.”
Indeed, it can be frustrating for an agent to find his or her authority denied or disregarded in transactions on behalf of the principal. However, refusing to properly enforce the GDPOA can also defeat the intentions of the settlor, who often believes that he or she is making life easier for his or her family when the GDPOA is enacted. While an agent can apply to a court of appropriate jurisdiction to enforce the powers he has lawfully exercised, the prospect of having to litigate a transaction that should have occurred in the ordinary course of business is more than depressing. Litigation is costly and time-consuming, which was never the intent of the settlors who created the GDPOA.
The problem is so pervasive that lawyer groups have complained to lawmakers, the attorney general’s office and the Commerce Department that banks require the use of banks’ own power of attorney forms, which banks typically refuse to honor. While these complaints over the years have led to more uniform legislation to govern the GDPOA, practical problems remain.
Individuals or organizations may refuse a GDPOA for a number of reasons. The most common reason given was that the GDPOA was “stale” or too old. However, this reason is not based on any legal right, privilege or responsibility of the bank or institution. Most states allow GDPOAs with no expiration date. Banks often reject the documents, allegedly based on their age.
Another reason given was that the GDPOA was not recorded. As mentioned earlier, recording a GDPOA is necessary for conducting transactions involving real estate, but is generally not required for other financial transactions. Nonetheless, individuals or institutions may request that the document be recorded. However, recording may not be in the client’s best interest, especially if it is not necessary. Once recorded, the GDPOA becomes a public record and available to anyone who may request it. A recorded GDPOA certified by the county recorder can be a dangerous tool in the wrong hands.
Another often-given reason for rejecting the GDPOA is that the GDPOA does not allow the agency to carry out the intended transaction. The reason for this is legal because individuals or institutions may be held liable if they accept the GDPOA and carry out transactions not authorized by the GDPOA. In addition, individuals or institutions that facilitate transactions through acceptance of the GDPOA may be held liable if they are notified that the person or institution’s agent is doing anything that is not permitted under the GDPOA.
Of course, this potential liability is a major hurdle for individuals and institutions to be required to accept the GDPOA. This disincentive is especially severe when an agent attempts to close an account or liquidate a policy or asset using a GDPOA, since the individual or institution has no way of knowing the final disposition of the proceeds. For example, if the GDPOA does not allow an agent to make a gift to an agent or a third party, or state law prohibits such transactions, an institution may be concerned that closing an account or liquidating assets may facilitate an improper gift.
Beyond the reasons given, there are many reasons for rejecting the GDPOA, ranging from the correct to the ignorant to the incorrect. There are many right motives. Institutions may prefer the legal certainty and protection of probate court approval. In such circumstances, production of the GDPOA may actually lead to or influence a guardianship application. The agency may have good faith suspicions of improper use of the GDPOA. The agency may even suspect that the agent is incompetent or otherwise deficient.
Improper motives that lead to the denial of a GDPOA include the desire to maintain and maintain control over the asset, to prevent the discovery of mismanagement of the asset, undue influence by persons other than the agent, and disagreeing that the agent’s intended use of the asset is lawful. However, there may be no way to distinguish legitimate motives from improper motives, since those who reject the GDPOA will never admit improper motives.
Compounding the difficulty for agencies to accept the GDPOA is the motivation of family members to seek control over the elderly’s property. Many GDPOAs are simply preempted by family members applying for guardianship. Testifying before the Senate Select Committee on Aging, Dr. Diane Armstrong wrote:
“Most of these [guardianship] Petitions are filed by adult children who want some form of control over the personal and/or financial affairs of their elderly relatives. They are sibling rivalries rooted in issues of succession and control, often described as “a thinly veiled pre-death contest of wills”. Anyone over the age of 62 with coveted assets is at risk.As one forensic psychiatrist noted of these so-called conservation programs, “For every $100,000 in a given property, there is a lawyer; for every $25,000, a family member ; if there’s no money, no one will show up” (quoted in Harold T. Nedd’s Competing for care of elderly parents, usa today30 July 1998).
Equally disturbing, the court GDPOA’s are often ignored! Documents that most people rely on to reduce their chances of a court-appointed guardian are often simply ignored by the probate court. Diane Armstrong testified before the Senate Select Committee on Aging:
“When an older person is brought to court and forced to prove his or her ability, we quickly find out that the system doesn’t work. Our system is rife with court-sanctioned elder abuse. Why? Judges overturned the The safeguards implemented are placed in the code. It happens every day. Judge ignores enduring power of attorney – If we become incapacitated, each of us can create a paramount document that determines our care… the judge ignores our pre-selected list of proxy decision makers. The current system doesn’t work.
Therefore, the GDPOA does not provide full guardianship protections. Especially if a person foresees a need for such protection because of the size or composition of his or her estate, or because of the makeup of his or her family, or because of family disunity, he or she should consult with an estate planning attorney A trust that maintains and maintains control over assets and decisions. This type of trust planning as part of comprehensive estate planning can provide a more comprehensive solution than GDPOA and wills.
Regardless, there are strategies that can help increase the chances of a GDPOA being accepted by an individual or institution. First, estate plans are reviewed annually and the GDPOA is re-enacted periodically. Second, provide the agency with a copy of the GDPOA before any illness occurs. The Agency is required to issue a letter acknowledging receipt of the GDPOA and the outcome of its review. With an agency letter accepting GDPOA documents, the likelihood of GDPOA acceptance in the future is increased. At least, when using the GDPOA, it is always expected that the person providing the letter is still in the institution.
Third, the GDPOA that is exclusive to the executive agency. Some banks and brokerage firms require clients to sign their own authorization form to allow others to handle client accounts. Usually, there is nothing wrong with these short powers of attorney, as long as they do not revoke, but merely reinforce the provisions of the GDPOA. If you have any questions or concerns, simply get a copy and have it reviewed by an estate planning attorney. Finally, add the surrogate’s name to all accounts prior to the onset of the illness as “Actress” or “De facto surrogate.” Correspondingly granting title to the asset does not give title to the agent, but increases the chances that the GDPOA will be accepted without reservation if required.
But, perhaps, the best strategy for planning for incapacity, incapacity, and disability is comprehensive estate planning that includes trusts.
