Q: Why does everyone say I need a power of attorney and will? I don't have enough money to worry about it.
A: Both of these documents: power of attorney (POA) and will give you financial peace of mind. I have recently been working on a number of cases where individuals have neither a POA or a last will and testament (will). This can lead to some sticky situations with lots of hassles later on.
The POA and Will are two very different documents. The first, POA is a legal document that designates another individual or individuals who have the right to make financial decisions for you. I recently asked a local attorney to describe the POA. Here is what he said "The agent (POA) acts on behalf of and at the direction of the principal while competent. The principal does not give up any of his/her independence or control to the agent. The agent should not act without instruction unless the principal becomes incompetent. The agent should never do anything the principal does not authorize or approve while competent. When the principal becomes incompetent the agent has to act at his/her discretion, but still for the benefit of the principal."
I would recommend seeing an attorney to help you develop and enact this POA document. An attorney can explain the ins and outs of the different types of POA documents and what works best for you and your situation. There is a standard POA, which gives another individual the right to make financial decisions and transactions with your money and property. In this situation you must be competent and able to understand what is happening. Another type of POA is the Durable POA, and this is the document I usually recommend establishing. A Durable POA in layman's terms means that your POA can handle your financial matters even if you are sick, not competent or otherwise unable to understand the decisions being made. In many cases the reason you would want someone's help with your financial matters is due to being sick or otherwise unable to handle the matters yourself. I therefore recommend a Durable POA in almost every circumstance.
The POA document has recently changed. It now requires a much longer document. The document also stipulates that the individual who is appointed knows they have been appointed to this responsibility and are willing to carry it out if necessary. I really like this additional notification. I have been involved in situations when the POA did not know they had been appointed POA until an attorney calls them to inform them they need to step in to help handle the finances. This is not the best scenario.
A POA should not be appointed lightly. What I mean by that is that it must be someone you trust completely. A POA can sell the house you still live in, and many other things you may not want to happen. The POA is not legally allowed to use your money to pay their bills. Your money is to be used for you and your needs. So when thinking of who could/would be a good POA, pick someone you know very well and trust.
Some people do not realize that a POA/Durable POA ends at death. That means that once an individual has died, the person who was appointed as the POA has no further authority to handle bills or financial transactions. This can be quite a shock. Many people assume that the point of having a POA is so that they can "take care of" all those after death type of transactions. This is not the case; a POA is not valid after death. After an individual has died the last will and testament (will) becomes the standard.
The will is the document that allows you to list what needs to be done with your belongings, and financial assets. The will appoints an executor of your estate. This executor is the person who handles those financial obligations and disbursements. Often the POA and the executor is the same individual, but sometimes it is not. There are many situations where an attorney could be the executor. But it is often the POA.
The executor is the individual who will be responsible to "settle your estate." This means paying outstanding bills, liquidating assets, properties and belongings. Some wills designate who gets what and how much. Other wills are more general, leaving it to the executor what should be done.
When I asked that same local attorney questions about wills he offered the following advice: "A trusted family member should normally be appointed executor since there are commissions involved; there is no need to pay bank officers or professionals for being the executor in an average estate. Finally, the Surrogate's Court can only enforce the terms of the will. The executor has much leeway in how to administer the estate but must carry out the terms of the will. Leaving it to the executor to determine who will benefit from the estate and in what amount is fraught with danger. The court can enforce distribution to the executor in such a case, but cannot force the executor to then pass the estate assets along to others."
This is another reason to appoint an executor for your will that you trust. Also be sure to give them the written direction they need to complete your wishes. If you want a certain amount to go to a certain place, write it down. If you want a certain furniture piece to go to a certain person, write it down. This makes your wishes very clear.
If you don't have a will with an executor, your estate will have to be decided differently. Your bills and creditors are paid. Your remaining estate will be divided among a list of relatives stipulated by law. Relatives are listed as; "starting with the immediate family and, depending on who the surviving members of the family are, extending to first cousins once removed. These persons are called distributees. One or more of them in the same level of heirship will act as administrator. The administration of the estate is quite similar to that with a will, but often there are several family members with equal rights which may cause friction and more court involvement to settle disputes." This process can take longer and lead to hard feelings between family members.
Your original statement was you don't have enough money to worry about a POA or a will. I hope I have illustrated why you need a POA (ideally a Durable POA) and a will. It is not just those people who are wealthy who need a POA and will. All of us have financial transactions that must be completed, even if we aren't able to do it ourselves. The will makes for a more timely completion of the multitude of decisions that need to be handled after we die.
A POA and will do not cost very much to enact with your attorney. A POA execute in the lawyers office, could cost between $25 to $50. If you expect the attorney to come to the home or hospital, it will cost more. A simple will with complications can cost between $100 to $300.
Most attorneys recommend a health care proxy as well ( costs about $35.)
If you don't have an attorney, there are lots of good local attorneys who would be glad to help you through this process. You usually can get both documents completed in two or three meetings with your attorney. There are even attorneys who will come to your home or apartment if you are unable to get to their office easily.
Note of thanks: This article was written with the help and input from Bruce S. Scolton, attorney at law of Erickson, Webb, Scolton & Hajdu.
Janell Sluga is a geriatric care manager certified and works for Senior Life Matters, a program of Lutheran Senior Housing, and has worked in Chautauqua County with seniors for more than 18 years. She is HIICAP (Health Insurance Information, Counseling & Assistance Program) counselor-trained by Office for the Aging. She does not sell insurance or represent any insurance company. She is an unbiased source of insurance and education to help seniors choose the best option for them.
You may submit questions to be answered in later columns to Janell Sluga at Senior Life Matters, 737 Falconer St., Jamestown, NY 14701, or call 716-720-9797, or by email at email@example.com. Please remember that not all questions can be answered in this format, but as many as can be, will be.