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Delegating Decisions for Financial Management
Originally published in the Winter 2011 issue of PDF News & Review.
By Janna Dutton, J.D.
Making well-informed choices for medical care is usually foremost in the minds of people who live with Parkinson’s disease (PD) and their care partners. However, a condition of making good care choices is making good financial planning choices.
At some point all of us — whether or not we live with Parkinson’s — may find ourselves unable to make necessary financial decisions. For a person with PD, there is the possibility that symptoms or cognitive changes may interfere with the ability to manage finances. I recommend that each of us make arrangements so that another designated person or institution will be able to manage our finances in the event that this occurs.
In the Summer and Fall 2010 issues of PDF News & Review, we reported on the importance of long-term care and delegating decisions for health care. This third article in our four-part series on legal issues that are encountered in Parkinson’s addresses how appointing a power of attorney and/or establishing a living trust, can help to ensure that your wishes for the management of your finances and property are carried out.
What is Power of Attorney?
A durable power of attorney for property is a document that allows another person to make financial decisions and transactions on your behalf. When you sign a durable power of attorney document for property or finances — the terms vary according to what state you live in — you give authority to another person, your agent, to make financial decisions and transactions for you. You keep your right to make your own decisions, but share this authority with another person — either when you ask them to or when a physician certifies that you are not fully capable of managing your own assets. The word “durable” means that, if you become incapacitated, the power of attorney remains effective.
Remember, you are the one who decides what powers to give your agent. These powers can be limited or broad, and might include the authority to buy property or to make investments.
It is very important that the document setting forth your power of attorney for property be drafted with your overall care and financial plan in mind. For instance, if you are planning to apply for Medicaid in the future, you may want to make gifts or other plans that will enable you to shelter some of your assets from seizure under the Medicaid rules.
Usually a financial agent has no authority to do this unless provisions are specifically added to the power of attorney document. Another power you might give your agent is authority to transfer your principal residence to your spouse in the event that you move to a skilled nursing facility.
In most cases, a power of attorney document is effective as of the day it is signed. That means — if you wish it — your agent can immediately take over tasks like paying bills or any other powers that you grant in the document.
Choosing an Agent: Who and Why
You can appoint any trusted adult — a spouse, partner, friend, family member — as “attorney-in-fact,” the legal name for the agent. Alternatively, you may wish to name a nonprofit agency, corporation or other entity to serve in this role. Just as it is when you are choosing an agent for your health care, so it is with property: it is important to choose someone who is willing, capable and attuned to your wishes. When the agent chooses to act for you under the document, the law specifies that it must be with due care for you, and for your benefit.
The agent has a duty to keep good records of what he or she has done with your finances and to preserve your estate plan. The agent should not be acting to benefit him or herself to your detriment. A fact sheet with more details is available from the Family Caregiver Alliance at www.caregiver.org.
What are the advantages of creating durable power of attorney — over, say, simply opening a joint bank account with someone who helps to manage your finances? With a durable power of attorney, your agent does not have access to your assets and credit for his or her own use. It also ensures that your assets are eventually distributed according to your will.
However, a word of caution is in order: there are unfortunately, cases in which power of attorney documents have been used for financial exploitation. In fact, some states have recently amended their statutes to try to curb the misuse of powers of attorney. You need to be quite careful when choosing your agent. Care partners or family members who observe a loved one’s agent engaging in any misuses of authority can take action to protect the person with PD. One option is to have a legal guardian appointed.
How to Designate Power of Attorney
To designate someone to exercise power of attorney on your behalf, contact an attorney who is aware of your overall financial and care plan to draft the document for you. Pre-printed forms may not be specific enough to describe the arrangements you wish to make. In addition, many banks and financial institutions have their own forms. You, your agent and your attorney should meet to ensure that everyone understands the document.
A person must be mentally competent at the time that he or she signs a power of attorney for property or finances. A person is presumed to be competent unless a court finds otherwise. If there is a question about this, the person with Parkinson’s and/or his or her family should seek the opinion of a physician and investigate the possibility of neuropsychological testing, which tests cognitive functioning. Most physicians will order this testing before they will make a determination about decision-making ability.
The living trust is another good tool for arranging your finances so that another person or institution can manage your assets if you are no longer fully able to do so. It is an agreement that you make — with either yourself or another person or institution as trustee — to hold assets that you transfer to the trust for your benefit.
The powers and responsibilities of a trustee are similar to those of an agent who is acting under power of attorney for property. Again, the powers and responsibilities are limited and controlled by the terms of the trust document. This can be an alternative to a power of attorney or — if you have property rights not held within the trust — the two can be used together.
How does it work? Here is an example: Eliza sets up her living trust document and signs it, and then appoints herself as trustee. She establishes the trust by transferring ownership of her assets to the trust. So instead of owning the assets outright, Eliza deeds her real estate and transfers her brokerage account, so that the statement and title read: “Eliza, trustee of the Eliza living trust.” In her trust, Eliza can appoint whomever she wants to act as her trustee in the event that she becomes incapable.
Most banks have minimums for setting up a trust. Although the minimum does not apply when a family member is acting as trustee, there will be other expenses, and it is advisable to conduct a cost/benefit analysis to determine if a living trust is worth the expense to create and maintain.
Remember that your financial agents have no authority in medical affairs, so you still need to have a separate Power of Attorney for Health Care and a care plan in place. Designating authority to trusted persons to manage your finances if you become unable to do so is an important step in planning for life with Parkinson’s.
Ms. Dutton is an Eldercare Attorney with Janna Dutton & Associates. She recently presented this topic at one of PDF’s PD ExpertBriefings. Her next installment will discuss Medicaid.