Powers of Attorney in New Jersey

Powers Of Attorney: Protecting Your Dignity and Finances in the Event of Incapacity

As the population in this country continues to grow older, most people have engaged in some estate planning. A thorough estate plan, however, generally consist of five documents. It includes a Power of Attorney, a Last Will and Testament, a Testamentary Trust, a Living Will and a Health Care Proxy. This article will highlight some of the advantages and practical considerations associated with Powers of Attorney.

The prospect of becoming incompetent and no longer able to make decisions and care for one’s self is extremely troubling. Yet most people are more concerned about how their assets will be distributed at death. This is supported by the fact that more people have properly executed Last Will and Testaments in place, or have purchased Life Insurance policies, than they do Powers of Attorneys. However, long-term incapacity is an issue for which everybody must be prepared.

A Power of Attorney is a document in which the Principal gives the Agent or attorney-in fact, the legal authority and power to act on his or her behalf. The grant of authority can be limited to particular acts, such as dealing with a certain bank or securities account. Alternatively, it can be broader in scope allowing your agent to sign checks, pay bills, deal with the Internal Revenue Service, and handle other legal and financial matters. There is a great advantage in being able to appoint the person who will act on your behalf if you become incapacitated, and spelling out the instructions that your agent is to follow in managing your personal care or property.

The Power of Attorney is a fairly simple, private and inexpensive way to protect your finances and dignity in the event of incapacity. If a Power is not properly executed, most often the family members, with the assistance of a lawyer, will petition the court in a guardianship action. This process, in which the senior is declared a legal incapacitated person, is very lengthy, expensive and humiliating.

There are generally two types of Powers of Attorney. A “durable” Power takes effect the moment the document is executed, and continues even if the principal subsequently becomes disabled or incompetent due to sickness, accident or age. It is critical that the document include language that “This power of attorney will remain effective despite the subsequent disability of the principal. The grant of authority terminates at the time of the principal’s death, but can be revoked by the principal at any time during capacity. Since the grant of authority is effective during your capacity, it is important to select an agent who is trustworthy. This often is a spouse, a child, or a longtime friend. It is wise to appoint alternate agents who will act if the first named agent declines to serve.

The second type is known as a “springing” Power. This document becomes effective only in the event the principal becomes disabled. There are many problems attached to this type of power, i.e. when has the power “sprung”, proving with doctors help that the principal has in fact become incapacitated? To avoid this issue, it may be better to execute a durable Power.

Furthermore, the document must be properly drafted to include language allowing the agent to make gifts. Many incapacitated individuals find themselves in a nursing facility. Their family members or agent consult with an attorney to qualify the individual for governmental assistance programs such as Medicaid. However, if the document does not authorize the agent to make gifts, there is a problem. Instead, a guardianship proceeding must be brought to allow the guardian to act and make gifts for the individual’s benefit. Thus, it is critical that before one executes a Power of Attorney, he or she discuss it with an attorney competent in the area of Elder Law and Estate Planning.