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Davidow, Davidow, Siegel & Stern, LLP
Long Island's Elder Law, Special Needs & Estate Planning Firm

Thursday, September 30, 2004

Durable Powers of Attorney - Part 1

Let's start with the basics. A durable power of attorney is a document in which you can delegate certain powers over your financial life to another person or persons. While it takes effect immediately upon signing, it is most useful at a time when, for a variety of reasons, you can no longer act on your own behalf. In fact, what makes the power of attorney "durable" is the very fact that your agency can act for you when you, the principal, suffer from some disability. For the power of attorney to actually be "durable", the document must simply state that the agent can act regardless of any subsequent disability of the principal, or words to that effect. Since there is a high probability that an older client may face such a period of disability, a durable power of attorney is one of the essential tools that must be implemented in any estate plan for an older adult.

Most of us may know this already, but what we do not know is the extent of ELDER ABUSE associated with durable powers of attorneys. We do know who the abusers tend to be though: known abusers are family members, professionals, caregivers and scam artists, who use the durable power of attorney for their own benefit and of the benefit of their principal.

Persons who are older and sicker are among the most vulnerable people in our society, especially those who become dependent upon their caregivers. As such, they have a dual problem; they are both a likely target for abuse and may be unable or reluctant to report such abuse. In fact, victims of such abuse may be threatened by their abusers with physical or emotional harm, or withdrawal of care, or may simply be unable to comprehend that they are being abused in the first place.

This problem of elder abuse through the misuse of a power of attorney is expected to grow as the population of frail elderly grows. This is especially true because we also expect the use of durable powers of attorney to grow. Why not, the durable power of attorney is the most simple and cost efficient method of handling a person's finances. Moreover, they are very easy to obtain. Just click on to the internet or walk in any stationary store and you can have one in minutes. But perhaps they are too readily available.

Clearly, those who do not use legal counsel will be unaware of the document's scope, limitations and potential for abuse. We'll go into detail in a future newsletter.

Tuesday, September 21, 2004

Durable Powers of Attorney - Part 2

Although this document starts with a bold faced warning, few read it, and those who do fail to understand its inherent legalese. In fact, it has been reported that many older principals sign their documents based only upon the limited information given to them by their "abuser agent". It's just too easy and perhaps too tempting for those who mean harm!

At present, the execution of a durable power of attorney is accomplished by the principals's notarized signature. Would strengthening the execution requirements make more principals aware of what they are signing and dissuade would be abusers? Certainly the notary process is not taken as seriously as it perhaps should, many times, however, with the best of intentions. Would the process be improved if the notary faced a felony charge for not making the necessary inquiries as to the capacity of the principal to sign? What if the notary were personally liable for any financial loss incurred as a consequence of the misuse of a durable power of attorney, at least under circumstances where the documetn was notarized without the presence of the principal or signed by a clearly incompetent principal.

Would it be better if we required a durable power of attorney signing using the same formalities of a Will signing? Perhaps, but forging signatures and finding co-conspirators to witness the documents seems like an easy way to circumvent the good intention of increased formalities. If this latter point is true, increased execution requirements will likely not have an appreciable effect on such elder abuse.

What if all durable powers of attorney had to be prepared by attorneys? Certainly we would think that if a lawyer is involved in the process, such elder abuse would be caught in its tracks. But this is probably not the case in practice because of our zeal to help and our naive under-appreciation for the potential for abuse.

Next time we will illustrate this by looking at a common example in an Elder Law attorneys's office.

Sunday, September 5, 2004

Durable Powers of Attorney - Part 3

A common example in an Elder Law attorney's office might go something like this...A son may come into the office and say that his Mom is bedridden and has been diagnosed with the beginnings of Alzheimer's disease. Immediately we are concerned with the capacity of the client, at least down the road. As lawyers we know that an expensive guardianship adventure awaits the client unless a durable power of attorney is quickly executed. Moreover, if we prepare a Durable Power of Attorney, it would usually contain very liberal powers, such as the power to make gifts and self-deal to enable effective Medicaid and tax planning. This in turn makes it easier for a would-be abuser to abuse.

So, should we do the easy thing? Should we prepare the durable power of attorney and hand it to the son. this would be the easiest and in many cases the best solution. The son is usually looking for a quick and inexpensive solution to his problem and we are usually trying to provide such a solution. This may in fact be what the elderly person wants as well.

But shouldn't we insist on going to Mom's house and talking to her? Clearly this strategy would provide the best protection for Mom. But is it overkill to go this far in every case? Who is the client in this situation anyway? The Mom or the son? Does it matter if we get the feeling that the son is on the up and up? Wouldn't this be a waste of time and money in most cases, as most children are not out to financially abuse their parents? This is an ethical siutation that Elder Law attorneys face everyday. Do we need a hard and fast rule for these situations or as true advocates for the elderly, can we satisfy our ethics and our natural inclination to serve the elderly by using our judgment on a case by case basis? Besides, are clients willing to pay for the conservative service? At least for the clients who seek our advice, I believe the case by case approach is the most practical approach, in spite of the fact that some will fall through the cracks.

The bottom line is that durable powers of attorney are being abused. Legislation should be enacted to balance the need for a simple and convenient solution with enough safeguards to prevent abuse. Involving attorneys in the process may help. Perhaps requiring the formalities of a Will signing will force more seniors to seek legal counsel before signing such a powerful document. Lawyers are involved often in this process anyway and they can at least exercise their independent judgment as to whether a particular elderly person needs further protection. Many may still fall through the cracks, but a balanced solution is what is called for under these circumstances. A power of attorney should be easy to obtain in most cases, but the individuals need to appreciate that the person they choose as their agent may have a different agenda. We and our clients need to proceed with caution. In the end, perhaps our greatest goal is to continue to educate the public on the durable power of attorney's scope, limitations and potential for abuse.