Preparing For Incapacity Durable Power Of Attorney Helps Assure Proper Flow Of Funds When Needed

Under Massachusetts law, any competent person is authorized to establish a durable power of attorney (POA). A POA is a document that allows another person, usually a spouse, parent, child, or other close family member, to make decisions for an incapacitated person in the event of a physical or mental disability.

This may prove to be an extremely useful document when a person becomes incompetent or incapacitated and is unable to handle his or her own financial affairs. It allows bills to be paid and insurance forms to be filed, among other things. However, a person may wish to have a POA effective only upon becoming incapacitated, so that it will not be used while the person creating it is of legal competence. In this situation, specific language called a ‘springing power’ is added to the document.

Benefits of POA

The major benefit of establishing a POA is that it remains valid after the person establishing it becomes incompetent or incapacitated. This alleviates the necessity of probate court proceedings for guardianship or conservatorship.

The benefits of not requiring probate are three-fold: the use of the POA will be private and thus not open to the public; the document eliminates ongoing probate expenses and the legal expense of guardianship; and it eases the additional emotional trauma caused by court proceedings.

The key is that the POA must be prepared and signed prior to the disability. If not, then a probate proceeding may be necessary in order to allow one’s affairs to be managed.

The person appointed in the POA is called the attorney-in-fact. He or she is usually authorized to handle all of the ordinary aspects of a person’s affairs including, but not limited to, real estate, bank accounts, taxes, insurance policies, and tangible personal property. In addition, the person may have the authority, if granted in the document, to make gifts, decline to take property from another person’s estate, and wield any other powers the individual wishes to grant. A person working under a POA may not make a new will for the principal.

Until the person granting the POA becomes incapacitated, the POA may be revoked, amended, and changed. However, once incapacity has been established, the document becomes irrevocable and may not be changed. This document terminates upon death of the principal.

Under Massachusetts law, specific words must be included to cause a POA to become effective after incapacity but before death. Either of the following examples may be utilized. “This durable power of attorney shall not be affected by subsequent disability or incapacity or the principal,” or “This durable power of attorney shall become effective upon the disability or incapacity of the principal,” are both appropriate terminology.

Although there is no specific definition in the Mass. General Laws as to what constitutes disability or incapacity, it has been recognized that a mental illness or any physical disability or significant incapacity that causes a person to be unable to attend to their own affairs, and is diagnosed by a written medical certification, will effectively trigger the incapacity clause in a document.

Choose Wisely

Prior to executing a POA, one must carefully select the person he or she is designating to be in charge of the affairs, and must also be secure in the fact that this person is not only financially responsible, but also honorable and trustworthy. This person will have tremendous authority, including control over all financial activity for the incapacitated person. He or she could potentially deplete bank accounts and neglect financial responsibilities, so this power must not be abused.

While the durable power of attorney is an attempt to alleviate the financial burdens noted above, there are some banks, insurance companies, and taxing authorities that require their own specific POA to be signed. If this is the case, at the time of the execution of a POA, one should consider also completing any additional necessary documents to ensure that the proposed use of a complete POA will be available if and when needed. Of course, as with all legal documents, professional assistance should be obtained in the preparation of a durable power of attorney.

Hyman G. Darling, Esq., chairman of Bacon & Wilson’s Estate Planning and Elder Law Department, is recognized as a preeminent estate planner. His expertise includes all areas of estate planning, probate, and elder law; (413) 781-0560; harling@bacon-wilson.com.