The Power of Attorney (POA)
“At Last” was not only one of the signature songs of the legendary Etta James, but it was, and continues to be, one of the most played wedding entrance songs of all time. Other powerhouse hits that contributed to Ms. James’ success include, “Sunday Kind of Love,” “Tell Mama,” and “I’d Rather Go Blind.” She went on to be inducted into the Rock and Roll, Grammy and Blues Halls of Fame and won many Grammy and Blues Music Awards. However, in spite of her much acclaimed success in the music industry, the final stages of Ms. James’ personal life was nothing “like a song.”
Her family was engaged in a heavily contested conservatorship (or guardianship as it is referred to New York), which called into question the validity of a power of attorney (“POA”) executed by Ms. James appointing one of her two sons as her agent. It appeared that James was diagnosed with Alzheimer ’s disease in 2008, the same year she signed the POA. At that time, James had been married to her husband for forty-one years. Her husband, Artis Mills, challenged the POA in court and was ultimately named as conservator of Etta James’ estate. As you may have already deduced, this week’s topic is about powers of attorney, in continuation of our discussion on estate planning for mental incapacity.
A POA is a legal document wherein you designate to another person the legal authority to make financial decisions on your behalf in the event you become incapacitated. The New York General Obligations Law, Article 5, Title 15, governs powers of attorney. New York State provides for three types of POA: “nondurable” (valid for a fixed time to allow an agent to make decisions in a specific transaction, for example, in a real estate closing); “durable” (gives broader powers to your agent, becomes effective as soon as the document is signed, and ceases upon the principal’s death or revocation); and “springing” (becomes effective when a specified event occurs, for example, when the principal becomes incapacitated, and ceases upon death). The type you use will depend on your specific circumstances and objectives.
A POA gives an agent the authority to engage in financial transactions, such as paying bills, depositing checks, filing taxes, engaging in legal and real estate transactions, and applying for public benefits such as Medicaid (a statutory gift rider may be needed), among other things. The powers can be as broad or as limited as the principal wishes. A POA is void when obtained through fraud and undue influence, and a principal must have the requisite level of capacity to sign a POA. Generally speaking, the capacity required is the “ability to comprehend the nature and consequences” of signing the POA. When a principal’s mental capacity is in question at the time the POA is executed, a similar result could ensue as it did in the Etta James case. Her husband was able to challenge her POA in court, and after several years, the matter was resolved in his favor. It is noteworthy that not everyone is fortunate enough to have a family member appointed by a court to serve as guardian – in many instances where there is family strife, a third-party, unrelated to the family, is appointed by the court.
The POA allows you to designate multiple agents. It is recommended that you appoint one primary agent and one successor (substitute) agent, in the event the primary agent is not available or is unwilling to act. Designating two agents who must act together may cause delay and or conflict. Once your POA has been properly executed, give a copy to your agent, substitute agent, and your financial institutions. Be aware that some banks may prefer their customers use bank-issued POA forms and may not accept the statutory POA form. Please check with your specific bank and complete the bank’s POA form, in addition to executing a statutory POA.
Like the health care proxy (discussed last week), a POA is revocable, allows you to continue to make decisions on your own behalf until incapacity, and requires the appointment of a trustworthy agent. In contrast, a POA cannot be used to make medical decisions on behalf of a principal, and it is highly recommended, but not mandatory, to have an attorney oversee the execution of a POA as that attorney can assess the mental competence of the principal and later testify to the principal’s capacity in the event there are challenges to the POA.
In conclusion, plan ahead, communicate your wishes to your loved ones, consult with professionals, and formalize your wishes in writing. Waiting until tomorrow may be too late.
REMEMBER – National Estate Planning Awareness Month continues next week with a discussion on end-of-life estate planning. Take this time to put your estate plan in place. Start by setting up a consultation with an estate planning attorney – most are meeting remotely. And if you already have an estate plan in place, use this time to review your documents and make sure they still align with your wishes. See you next week! I can be reached at firstname.lastname@example.org. Lola Waterman, Esq.