The main discussion was on the use of a Durable Power of Attorney, when it isn't enough, and when a guardianship or conservatorship should be considered. Special guest was Mike Bogle of East Valley Fiduciaries. To listen to the entire broadcast, click here.
1. Durable Power of Attorney (created under the law of agency). A client, while having capacity, executes a document and grants certain powers and authority to an "agent" to act on his behalf in the event he becomes incapacitated.
a. When does the power begin? It can begin immediately upon signing the power, or it can begin in the future only after the client is deemed incapacitated, which is called "springing power."
b. When does the power end? All powers of attorney end at death and cannot be used to transfer assets and avoid probate when the principle dies. One can also draft a power of attorney to end upon some event, for example after vacation, after one year, etc.
c. What authority can be granted to your agent? One can grant the power to be very broad or can draft it to be very narrow.
d. Power can create a Health Care Power as well as a Financial Power.
2. What happens when a person becomes incapacitated and they haven't executed a power of attorney?
a. Guardianship - A court procedure where the judge appoints a "guardian" to look after the physical needs of the ward, such as food, clothing, shelter, medical care.
b. Conservatorship - A court procedure where the judge appoints a "conservator" to handle the financial affairs of the ward, such as manage the assets, pay bills, and protect the assets from depletion.
Down side is the guardianships and conservatorships are expenses and can be contested. They are expenses because there must be an attorney appointed for the Ward, an attorney for the Petioner, and other family members may get an attorney if they contest the appointment of a particular person.
3. Even if you have a power of attorney, at what point should you consider court protection and go for guardianship and conservatorship?
Powers of Attorney are meant by nature to be temporary solutions to an incapacitated client. If it looks like the incapacity is going to last for years, seek the protection of court supervision. There is also a potential liability to a person serving as a power of attorney, such as poor investments, self dealing, and lack of proper care.
Every person should create valid Health Care and Financial Powers of Attorney as part of their estate plans. And, if a person is serving as the agent for someone else under a power of attorney, he should seek legal counsel to avoid liability and to discuss the point at which a guardianship or conservatorship is necessary.