Many years ago, a young man brought his father into a law office, to have a power of attorney drawn up. The father, a widower, was going into a hospital for some surgery, and an expected period of convalescence. He had four other children, but the son who was with him at the lawyer’s office seemed to be the one who recognized a need to provide for handling of obligations during the father’s hospitalization and recovery. The lawyer prepared a Power of Attorney, and also a Will, as directed. The Will provided that upon death his estate would be divided equally among his five children.
Things did not go well after the surgery, and the hospitalization was longer than expected; so was the nursing home stay.
About a year later, the lawyer heard from another son of his client. This man told the lawyer that his brother had used the power of attorney to sell his father’s farm, tractor, truck, and furniture. The nursing home was sending bills to all the children, and the son who had been given the power of attorney was neither paying his father’s bills nor answering questions.
In 1999 the Pennsylvania legislature amended the statute to require that anyone, before signing a power of attorney, has to read and then sign a “NOTICE” on the first page of the document, double-spaced, in capital letters, warning him that the agent to whom he was about to give his power could, without further consultation, permission, or even warning, sell, mortgage, or otherwise dispose of all the person’s property and invest or spend the proceeds.
And on the last page of this power of attorney, the agent is required, before he can make use of the power, to sign that he will exercise it only for the benefit of the principal, that he will keep the principal’s money and property separate from his own, and will keep full and accurate records of all receipts and disbursements, etc.
Problem solved, right? Well, not really. Trusting people still sign powers of attorney giving their agents authority to sell real estate, close bank accounts, transfer stock, change life insurance beneficiaries, and more. And sometimes the named agents, usually under financial pressures of their own, make cash gift to themselves from their principal’s bank accounts, change life insurance policies and pensions to make themselves beneficiary, fail to pay the principal’s bills and taxes, and more.
In many situations, a power of attorney is an essential, even vital, document. It is the primary legal means for one person to allow another to collect income and benefits, pay his bills, file his tax returns, and maintain his property and investments when he is for any reason unable to do these things himself. If a person becomes mentally incapacitated, or paralyzed by stroke, and there is no existing power of attorney, the only recourse may be the expensive and time-consuming procedure of petitioning the court for appointment of a guardian. This means getting a lawyer, going to court, giving medical proof, and paying for a guardian bond; and the guardian thus appointed is frequently not the one that would have been chosen by the person himself. However, the guardian must file an inventory of the incapacitated person’s assets within 90 days; and file a written report with the court annually.
A recent proposal in the legislature would require the agent in a general power of attorney to go into court for permission to do several things; such court approval has never before been required. It shows that the problem of abuse of power is still a concern.
We prepare durable general powers of attorney when requested by our clients. We review these with our clients and discuss them before the documents are signed. After the powers have been signed, witnessed, and notarized, the client is advised to not give the original power to his agent until he wants that agent to act. We suggest that the client meet with his agent before agent begins his duties, review the types of records to be kept, and the types of investments appropriate under the law and the particular situation; and report periodically to the client or some other designated person. The client may choose to leave the signed original document in our vault until it is needed, to avoid premature or unauthorized use.
Recently, a client added to the items the legislature requires to be listed at the end of the document, and signed by the agent before beginning to act. Specifically, that client also directed the agent to report to another named person before he made any payments exceeding $2,000.00, and at least 30 days before he transferred the client’s real estate. This other named person had known the client a long time, and had no connection to the agent.
There is much more in the statute; and what we recommend in a power of attorney. If you do not now have a power of attorney; or would like a review and discussion pertinent to your own circumstances, give us a call to schedule an appointment.