By Tim Barkley. September 2021.
“I don’t need a power of attorney. My spouse and I own everything jointly.”
“My daughter is on all my accounts, so I don’t need a power of attorney.”
“I’m not letting anybody take control over me! I’m not signing that paper!”
“I don’t want my power of attorney to be active unless I’m unable to take care of myself.”
“This long power of attorney form doesn’t apply to me. I just have a bank account and a car!”
All of these all-too-common misunderstandings can create havoc for you and your loved ones.
It’s true, if you and your spouse own your bank account jointly, either one of you can sign a check or make a deposit, no questions asked. But it takes both signatures to sell your car or your mutual funds, or to sell or refinance your house. Just because it’s owned jointly doesn’t mean that either one of you can act without the other.
If your daughter is a joint owner of your accounts, you still need a power of attorney (see above), and you also need to consider that the “owner” in “joint owner” means just that. She owns your bank account, and while she might never take advantage of that power and use your money for her own needs and wants, her creditors won’t feel so constrained. It’s legally her money, and they can get into your account to pay themselves the money she owes them.
It’s great to keep control of our lives as long as possible, but not at the expense of your wallet, your dignity and your loved ones’ quality of life if you become incompetent. If you have no power of attorney, the only way your loved ones can take care of your needs is to ask the Court be appointed your guardian. That takes months and costs thousands of dollars, and ensures that the Court intrudes on the family for years to come.
All that could have been eliminated by a simple power of attorney … a power of attorney that a parent refused to sign because they feared loss of power. Now they have no power, and worse, because they didn’t choose who would be in control (by signing a power of attorney), they got no say in who now controls their finances and their lives.
A power of attorney isn’t about giving up control; it’s about deciding who will be in control when we can’t. It’s hard for some folks to imagine a world that they don’t control, but sometimes it’s out there waiting. We need to take action now so that doesn’t catch us unawares.
The thought that a power of attorney should not be effective unless we are incompetent makes sense at face value. The problem is that it’s hard to prove, to the satisfaction of a lawsuit-averse bank or doctor, that you are incompetent. That means that the person you wanted to be able to help you can’t do so without hiring multiple doctors to evaluate you and determine your competence. And because you can regain competence, some financial institutions want you re-evaluated periodically to make sure you’re still incompetent. This often ends up in a guardianship proceeding, with its misery and expense.
In Maryland, estate planning powers of attorney are long. They have to be! That’s because your power of attorney only gives your “agent” – the person acting for you – the powers you have specifically listed. The power of attorney that simply states that “my agent may do anything I could do” doesn’t work. Put differently, if you don’t specifically enumerate, you don’t effectively delegate.
And because unexpected things happen (like the man who didn’t want his power of attorney to include powers regarding stocks, because he didn’t believe in investing in the stock market – but who inherited his aunt’s stock portfolio on her death), it’s safest to include everything we can think of, just in case you need it. This avoids guardianship because your loved ones need powers not listed. So we exhaustively enumerate, in order to conscientiously delegate.
And a power of attorney isn’t just about writing checks and paying bills. It’s about selling your car or your home if you’ve had to move; terminating your cable or satellite contract; getting information about your financial matters and ordering your affairs. So, even if your daughter is a signer or joint owner on your bank account, that won’t let her tell the satellite company that you don’t need their services anymore because Comcast is cheaper and is now providing service to your home (true story). And it won’t let her change the beneficiary of your IRA when your spouse dies and we find out that he was the only listed beneficiary on your IRA (another true story, which led to the IRA paying out into the surviving spouse’s estate, at a cost of tens of thousands of dollars in income tax).
A power of attorney is a powerful protection if drafted and used correctly. Don’t be caught powerless!
Attorney Tim Barkley
The Tim Barkley Law Offices
One Park Avenue
P.O. Box 1136
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