Do Your Parents Need Your Help?
I have had two clients call me recently with the same problem. Each one had a parent who had been the victim of a scam. One scam started on Facebook, and, unfortunately, by the time my client found out, his mother had lost her life savings. My other client was luckier and learned about the scam early on. If your parent needs help, how can you help her or even take over making decisions for her?
Let's assume Jane's father is getting older and needs some help. In order to allow Jane to pay bills, her father adds Jane to his checking account. This is very common and will allow Jane to pay bills for her father, however, there can be other legal consequences as well. If Jane and her father go to the bank and ask to add Jane to dad's account, the bank will almost always add Jane as a co-owner. As a co-owner, Jane can sign checks to pay dad's bills, but Jane can also withdraw all of the funds for her own use. At dad's death, the entire account will pass to Jane, which may not be what dad wants if Jane has brothers and sisters. And, if Jane has a judgement against her for an unpaid debt, her creditors can seize the entire account.
Instead of adding Jane to his account, dad could sign a durable power of attorney naming Jane as his agent. As dad's agent, Jane would have authority to pay his bills. Financial institutions would also be authorized to speak to her if she needed to get information for dad. In addition, unless the power of attorney specifies otherwise, Jane will be authorized to handle most transactions, including those regarding: real estate; financial institutions; stocks and bonds; tangible personal property; safe deposit boxes; insurance and annuities; retirement plans; social security, employment and military service benefits; taxes; claims and litigation; commodities and options; business operations; borrowing; and estates. (Note: even if the power of attorney purports to give Jane the power to handle social security matters and tax matters, the federal government is not obligated to honor a state law power of attorney. Each of these government branches requires its own form for a person to serve as agent.)
In addition to a power of attorney, dad could create a "living trust" and name Jane as the trustee. A living trust is a revocable trust that can be used to manage a person's assets while he is alive and can take the place of a will at his death. Even if dad has a living trust, however, he should also have a power of attorney for property for two reasons: (1) some assets, particularly retirement accounts, cannot be transferred to a trust, meaning Jane, as trustee, would not have power to deal with those assets, and (2) Jane may discover assets that are not in the trust and would need the power of attorney to transfer the assets into the trust.
Jane can use the power of attorney for property to assist dad, but what happens if dad becomes incompetent? If the power of attorney for property is "durable," Jane will continue to be able to use it even if dad is incapacitated (the legal term). As trustee, she would also be able to continue to manage dad's property. However, she will need a health care power of attorney to make medical decisions for dad if he is not able to do so.
As its name implies, a health care power of attorney governs medical decisions. It governs all medical decisions including organ donation and the termination of life support (as specified by dad in the power of attorney). A health care agent has the power to admit dad to a hospital, nursing home or institution. However, dad can revoke the health care power of attorney at any time, even if he is not competent. Therefore, it can be difficult if not impossible to involuntarily commit someone for mental health treatment using a health care power of attorney.
Financial and health care powers of attorney must be signed by dad while he is still competent. It is too late if dad has had a stroke or dementia or alzheimers has set in and dad no longer knows what he is doing. It is possible to sign the documents if, in spite of a stroke or early dementia or alzheimers, dad still knows what he is doing, however, far too many people only call a lawyer when it is already too late.
If dad does not have a power of attorney, then what? For financial transactions, the only other option will likely be to have a guardian of the estate appointed. If dad does not object to the guardianship or if he is undeniably incompetent, this can be a relatively straight forward procedure. An "interested person" (generally a family member) files a petition with the court. The petition must include an affidavit from a doctor stating that dad is incapable of handling his own affairs. Dad must be served with process, i.e., the Sheriff's office or a private process server must deliver the papers to him, and all other interested parties must receive notice as well. This includes a spouse, adult children, parents, adult siblings and any agent acting under a power of attorney.
The court will appoint a guardian ad litem to meet with dad and report back to the court if he thinks a guardian is needed and if the proposed guardian is acceptable. If dad wants to challenge the guardianship proceedings, he will also hire a lawyer or the court will appoint one for him.
If the family is in agreement on who should be designated guardian, the court will generally appoint that person. If there is no agreement, the court will first look to the person designated by dad. A person generally designates who should be named guardian in powers of attorney. If dad does not have power of attorney, the court will make the decision as to who should be appointed guardian of dad's estate (his property) and of his person (his living arrangements, health care, etc.). Multiple people can be named as guardians, so siblings can be named co-guardians.
What happens if dad appoints Jane as his power of attorney and Jane's brother thinks Jane is misusing dad's money or making bad health care decisions for him? In that case, the brother can ask the court to order Jane to provide a full accounting for financial matters or ask the court to order a change in medical care. If Jane refuses to do so or if improper conduct is found, the court can remove Jane as power of attorney and allow the alternate agent to serve, if there is one, or appoint a guardian for dad. Similarly, if Jane is serving as guardian, she must file an accounting with the court. If her brother believes she is not properly caring for dad, he can file objections to the accounting.
In order to avoid these disputes between siblings, the best practice is transparency. Dad should tell the children who he has designated as power of attorney so the children know that is what dad wants. The agent should keep the other siblings informed of her actions. If no information is provided, it is easy to suspect the worst. Finally, if Jane's brother thinks a power of attorney is bing abused, he should act sooner rather than later. There are too many cases where a power of attorney used all of mom's or dad's money, and by the time it was discovered, it was too late.
Remember, it is much easier to plan for incompetency than it is to handle matters after a person is incompetent. If you are a caretaker, encourage your loved one to address these issues sooner rather than later.