Disability Planning

DURABLE GENERAL POWER OF ATTORNEY ARE A HIGHLY IMPORTANT ALTERNATIVE TO CONSERVATORSHIP

By Paula Peaden, Esquire

The Life Insurance industry tells us that 50% of the people in our country today will at some time in their life suffer from total disability for 90 days or more. If no pre-crisis planning has been done and the individual is no longer able to care for his or her affairs, many problems must be unnecessarily faced by the family or loved ones of the disabled person. 

If a mentally or physically disabled person is unable to make the decisions necessary to carry out the responsibilities of living and has done nothing, while competent, to designate a substituted decision maker, often it is necessary to have the court appoint a conservator to make these decisions for the incapacitated person.

Substantial, unnecessary costs are incurred in having a court designate a conservator to manage the affairs of a disabled person. The conservator has many costs to pay such as bond premiums, attorney fees and fees to the Commissioner of Accounts, all of which could have been avoided. Family harmony can be disrupted over which person should be designated the conservator. 

Usually the disabled must be declared incompetent by a court before a conservator can be appointed.

The General Power Of Attorney is one of the most important legal document an individual can have. Most people assume that a will is the most important legal document one can have. A General Power of Attorney is equally as important. It authorizes your agent to do practically any act which you could do for yourself.

A power of attorney is a legal document in which one person designates another person to act for them. The person who the power of attorney prepared for is the Principal. The one designated to act in the principal’s behalf is the Agent. The Agent under a Power of Attorney is also known as the Attorney-in-fact.

The word durable in a Power Of Attorney is highly important and means that the Power of Attorney states that its effectiveness will not terminate on the incapacity of the Principal. If this language is not included, the document will be terminated by the incapacity of the Principal. 

The Principal may want to allow the Agent to make gifts to certain persons in order to avoid high death taxes or to express the Principal's concern for his loved ones. The specific power to make these gifts should be included in the Power of Attorney with whatever limitations the Principal wishes to impose. This gift giving power may cause serious tax problems to the Agent, if the Agent dies while the Principal is living. Sound legal advice can avoid unexpected tax traps.

The agent must be a responsible, honest, intelligent person, who can be trusted with the often heavy responsibilities of caring for the Principal. Untrustworthy, immature, or irresponsible persons serving as an Agent can do great damage to the estate of the Principal, whether or not disabled.

Sometimes a relative or other person serving as the Agent under a Power of Attorney will begin to use the document before the Principal wants the Agent to act. Before the Principal knows what is happening, the Agent might have taken all responsibility for managing the estate of the Principal away against the wishes of the Principal. Such action is often highly detrimental to the morale and well being of the Principal. Parker, Pollard & Brown offers an escrow service to its clients where it will retain possession of the power of attorney with a letter of instruction on when it can be used. Typically the escrow letter instructs the law firm to release the power of attorney only if, in the opinion of the law firm, the Principal is incapacitated. The escrow letter may release and indemnify the law firm for the release of the power of attorney. Such an arrangement can often avoid the premature use of the document.

A General Power of Attorney is a document filled with pitfalls and potential family disasters, when prepared by one who is not a skilled attorney in estate and taxation law. Forms for this legal instrument can be found in form books or purchased at a stationary store, but the purchaser must beware, since the form may fail to do the job that is needed. (March 2002)

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