Posts Tagged ‘agent’

Durable Powers of Attorney: “Springing” or “Surviving”?

NOVEMBER 7, 2016 VOLUME 23 NUMBER 42
For over four decades, Arizona law has permitted residents to create powers of attorney that continue to be valid even after the signer becomes incapacitated. That simple concept, once thought to be radical, has become widespread: all U.S. states now permit powers of attorney to be “durable.”

To make a power of attorney “durable” under Arizona law, it should include language that indicates the signer intends it to either:

  • Continue in effect even if the signer becomes incapacitated, OR
  • Become effective only if/when the signer becomes incapacitated.

You can read the law in question, Arizona Revised Statutes sections 14-5501 and those following, to see how durable powers of attorney work in Arizona. There is even a basic form for what the signature block might look like.

But what is the difference between the two kinds of durable powers of attorney? Lawyers often refer to them as “surviving” or “springing” powers — the former exist and are operative as soon as signed (they “survive” the later incapacity), while the latter become effective (they “spring” into existence) upon the later incapacity of the signer.

Which is better? Of course that depends on what the signer prefers, but there are some practical considerations that you might not have thought about.

Many of our clients feel uncomfortable about giving their agent(s) the power to handle financial matters immediately. While they completely trust the person they name as agent, those clients think it might be tempting fate to give authority to someone else. They don’t really expect their agent to act unless and until they are unable to take care of things themselves, and prefer to make their powers of attorney the “springing” type.

There are problems with this approach, however. Those problems can include:

  1. How to prove incapacity? How, exactly, will your agent prove that you have become incapacitated? Will it require a letter from your attending physician? Or two letters from two different physicians? Or your consent? How protective do you think you should be? Of course, one of the reasons you are signing a power of attorney is so that we won’t have to initiate legal proceedings to permit your agent to take over your finances. By making the proof of incapacity difficult, you might be reducing the value of the very document itself.
  2. Is there a doctor in the house? Perhaps you have considered the problem described above, and you’re willing to let any doctor (not necessarily your attending physician) certify your incapacity — and you are not planning on requiring a second opinion. Still, it can be quite a challenge to get any medical person to sign a letter saying you’re incapacitated. It might be that your medical care isn’t even being provided by a physician — maybe you’ll be evaluated by a nurse practitioner, or a psychologist. Can we write the document so that your chiropractor could make the decision? And have you tried to get a letter signed by any medical provider in the modern era of HIPAA?
  3. “I’ll be the first to know when I need it.” No, tragically, you won’t. In fact, you’ll probably benefit from assistance for a period of time when you are still capable of doing things yourself. The law has a quaint notion — people are fully competent until some future instant when they suddenly, and demonstrably, become incapacitated. That isn’t actually how it happens. You are much more likely to slowly decline, needing help with some large decisions (perhaps investment management, or organizing assets) long before you absolutely need help with smaller decisions (like signing checks). Consider the importance of letting your agent take over gradually, leaving you in control of as much as you can (and wish to) manage for as long as possible.
  4. Planning on leaving Arizona (even for visits)? Some states (notably Florida) don’t even permit “springing” powers of attorney. Maybe you think it unlikely that you will relocate to Florida, but we are a pretty mobile society. You might well end up in a state where the “springing” power of attorney is problematic — and possibly at a time when you are unable to sign new documents.
  5. Really? You don’t trust your agent? Giving someone a power of attorney is, literally, giving them the tools to misuse your assets. Of course they are not supposed to commingle assets, take your funds or make decisions in their own interest. Some do. You need to make your selection very, very carefully — your agent needs to be completely trustworthy. And if you trust them when you’re incapacitated (when you don’t have the mental acuity to protect yourself), why wouldn’t you trust them right now, when you are able to monitor their actions closely?

As you can probably tell, we are inclined to recommend that people sign “surviving” durable powers of attorney, rather than “springing” powers. That said, clients frequently are just uncomfortable giving immediate authority, and we will respect your decision. Don’t be surprised if we try to convince you to reconsider, though.

Incidentally, the same considerations apply when we consider health care powers of attorney — but there is a different practical reality. Since you will necessarily be present when health care procedures are undertaken, and since medical personnel are almost certainly involved, it is much easier to assess whether you are able to make your own decisions. A good agent will involve you in the decision-making process to the extent that you are able to participate. A good medical provider will do the same.

Trustee Not Personally Liable for Trust Business

JUNE 23, 2014 VOLUME 21 NUMBER 23

It’s a small point, but important — and the Arizona Court of Appeals reiterated it in a decision released last week. So it seems to us that it would be appropriate to call attention to this simple rule: generally speaking, a trustee is not personally liable for her (or his) actions as trustee.

There are, of course, exceptions. A trustee may so intermix her personal interests and those of the trust that she is liable both personally and as trustee. There are some trusts that will be treated as the alter-ego of the trustee — so that creating the trust does not shield the trustee from personal liability. Sometimes the trustee’s actions are so clearly wrong that she might be liable, to trust beneficiaries or others. But in the vast majority of cases, a person acting as trustee can bind the trust without exposing herself to liability.

This concept is not esoteric. It is central to the whole idea of trusts. If you name your daughter as trustee, she needs to know that she can administer the trust without exposing her own assets to liability. If you take over a trust after the death or disability of someone else, or even if you are a professional trustee, you need to be comfortable that you will not be liable for the ordinary business of running the trust.

How was this issue involved in last week’s Arizona court case? It was simple: a trust owned a piece of real estate, and the trustee signed a listing agreement to get the property sold. Later the trust canceled the listing agreement, and the listing agent sued the trust — and the trustee — for the amount specified as payable in the listing agreement upon early termination. A jury found in favor of the listing agent, and judgment was entered against both the trust and the trustee. The trustee appealed, arguing that she should not be liable for the trust’s violation of the terms of the agreement — even if she was the one who both signed and terminated the listing agreement.

The Arizona Court of Appeals reversed the jury verdict against the trustee individually, while upholding the judgment against the trust itself. There were arguments about whether the real estate agent was actually qualified to act, and whether he breached his duties to the trust — but those arguments only went to whether the trust could terminate the listing agreement without paying damages. For our purposes, the important part of the court decision is the simple observation that when a trustee signs as trustee, she is not personally liable on the contract. Focus Point/Kantor v. Johnson/Oak Acres, June 19, 2014.

This principle is actually pretty straightforward, and well-established. Why would the listing agent argue that the trustee should be personally liable in this case? Apparently because when she signed the listing agreement, she did not write “as trustee” or similar language on the contract. But, noted the appellate court, her signature only appeared once, and she couldn’t be signing that one time as both trustee and individually — and there was no dispute that the trust, not the trustee, owned the property being listed. Besides, the contract terms clearly indicated that they were between the listing agent and the property’s owner, and the trust was the owner.

Although the listing agent argued that a handful of cases from other states supported holding the trustee liable, the Arizona court disagreed. In some of those cases, noted the court, the trustee had expressly signed as an individual, guaranteeing the performance of the agreement by the trust. In one other, the trustee had failed to make the argument before the trial court (and so was deemed to have waived it). In yet another case, the officers of a corporation signed in one place as officers and another without any designation — and they were deemed to have been signing in both capacities.

So what does this simple appellate case tell trustees about the discharge of their duties? It just makes sense to clearly indicate that you sign “as trustee” when you are acting in that capacity — it helps head off any argument, even if it is otherwise obvious that you are acting as trustee. The same can be said for someone acting under a power of attorney, or for the personal representative of a decedent’s estate. Just to be safe and clear, after your signature you should write something like “as Trustee of the Pyramidal Trust Dated January 7, 2010” or “as agent for John Roe,” or “as personal representative of the estate of Jane Roe” (substituting, of course, the actual names of the individuals or entities as appropriate).

Even if you do not add that language, you probably are not creating any possible personal liability — at least in any document that is clear about your signature being in a representative capacity. Be very, very cautious, however, about language that seems to include some personal liability — if a pre-printed form recites, for instance, that you are signing “as trustee, and personally as guarantor”, take the agreement to an attorney for review before signing. At the very least, strike out the offending language. Acting properly on behalf of someone else should not cost you personally.

Making Your Power of Attorney More Useable — and Useful

MAY 26, 2014 VOLUME 21 NUMBER 19

If you have had your estate plan prepared or reviewed by one of the lawyers at Fleming & Curti, PLC, you almost certainly have signed a durable power of attorney. You may have signed a document prepared by another lawyer, or even found one online or in a document kit. Regardless of where you got your power of attorney, it is probably the single most important document in your estate plan. It is the Rodney Dangerfield of legal documents — it seldom gets the respect or attention it deserves.

Why is the power of attorney so important? Because there is a high likelihood that you will experience a period of diminished capacity before your death, and a high likelihood that no probate proceedings will be required when you do die. Your will is an important document, but it has no usefulness while you are still alive. Your health care power of attorney is an important document, but it is less likely to be pivotal in handling your personal affairs at the end of your life. Your trust is important, but even if you transfer all of your assets to the trust’s name there is the possibility that assets will slip out of the trust over the years — making your power of attorney essential to get assets retitled after your capacity diminishes but before your death.

No doubt about it — your financial power of attorney is a central component of your estate plan. It is also probably the single most dangerous document you will ever sign. Think about the power you are giving to the agent you name in your power of attorney: it is a literal license to steal. Of course you can trust your family and close friends — but you should know that when exploitation of vulnerable seniors does occur, it is almost always involves misappropriations using a power of attorney.

So if this document is critically important, and terribly dangerous, what should you consider before signing it? There are number of pieces of advice we can give you about your financial power of attorney:

  1. Sign one. Yes, it is dangerous — but it is important to have one in place. Arizona lawyers will tell you that the Arizona probate process is not as complicated, expensive or time-consuming as people think it is — but the similar process for getting control of living people’s financial affairs (called “conservatorship”) is everything people think they should hate about probate. No power of attorney in place when you become incapacitated? Your spouse can not handle your finances automatically. Your will provides no assistance. Your finances are likely headed to probate court.
  2. Consider opting for a “surviving” power of attorney rather than a “springing” power. Many of our clients are uncomfortable signing a power that could be used while they are still competent to manage their own affairs. They say (and reasonably so) that they want to handle everything themselves so long as they are able to — and there’s no reason to expose their assets to problems unless they become incapable. Fair enough, but if you do not trust your named agent to behave properly while you are still able to watch, why would you ever put them in charge of your affairs precisely when you are most vulnerable? Do you realize that by making the power effective only upon your incapacity, you are forcing us to get some kind of certification that you have become incapacitated? And what about the time when you are just making slightly foolish decisions, or have just become somewhat inattentive — do you really mean to prevent your agent from acting during those times? Nationwide, the trend is toward powers of attorney that “survive” your incapacity, rather than “springing” into existence when you become incapacitated.
  3. Sign your bank’s power of attorney form, too. The powers of attorney we prepare are works of art. They cover countless items that you would never think of, and even your bank’s lawyers would never think of. They are beautifully crafted, and they are worth every penny you pay for them. But your bank is stuck on this odd notion that their two-paragraph form is better, and they will keep trying to get you to sign it. We say: give up. Just sign their form AND the beautifully-crafted power of attorney we prepare. It will make your agent’s job easier. The same thing goes for your brokerage house, too — let’s get their form and get it signed. Let us help you get the right form, too, since the bank teller or brokerage house clerk you talk to will often hand you the wrong form, and you’ll end up creating a joint tenancy account with your agent rather than giving them a power of attorney.
  4. Learn the language. Impress your neighbors, friends, and bankers. The person named in your power of attorney to handle your affairs is called your “agent” (or, if you want to be more old-fashioned, your “attorney-in-fact”). They are not your power of attorney — that term is just for the document itself. So when your agent signs documents for you, they can sign as something like: “John Doe, as agent for Janet Rose” or “Janet Rose, by her agent John Doe.” This, of course, assumes that your name is Janet Rose, and your agent’s name is John Doe. You might need to make appropriate changes.
  5. Make sure your agent knows where to find the document. You don’t have to give any of your estate planning documents to your family while you’re still alive. Some people prefer privacy. Some do like to hand out copies, and that is also fine. But whether you actually give a copy of the power of attorney to your agent or not, we do urge you to let him or her know that it will be his or her job to get the document and take charge if something should happen to you. That means you have to keep the document somewhere it can be located, and update your information as you update the document.
  6. Update your power of attorney. Speaking of keeping things current, we do think it is a good idea to sign a new power of attorney every five years or so — even if you are not making any changes. Our beautiful form (see above) changes gradually over time as we add new items (our latest additions to the language of most powers of attorney: provisions for pets, and for your online accounts). The law changes gradually, and old documents are usually grandfathered in when there are changes. But it just makes sense to try to have a document that was signed in the same decade (or so) as it is being used.

We hope those tips help. Let us know if they trigger anything that makes you think you need to update your documents.

 

Pondering Your Power of Attorney

SEPTEMBER 16, 2013 VOLUME 20 NUMBER 35

Do you have a power of attorney? If so, do you know how it works? Is a “springing” power of attorney the best way for you to keep authority over your health care and financial decisions until a transition is needed? Many people have powers of attorney but do not understand how they work.

The power of attorney gives authority to an individual (the “agent” or “attorney in fact”) to make financial or medical decisions for another person (the “principal”) in the event of incapacity. Although sometimes health care powers of attorney are incorporated into general durable power of attorney, most people prefer to separate the two kinds of documents. A health care power of attorney gives an agent duties to make medical-related decisions and a durable power of attorney authorizes an agent to handle financial matters. While some states may give your health care agent the power to authority an autopsy, organ donation or burial arrangements, no American jurisdiction recognizes a power of attorney after the death of the principal. If you want to refresher on the basics, you might want to look at this white paper written by Slade V. Dukes.

One of the most important things to understand about your durable or health care power of attorney is whether it is a springing power or surviving power. A springing power of attorney is not immediately effective when you, the principal, sign it. Instead, the power can only become effective and “spring” into action when a specified event occurs like your incapacity or disability. A surviving power of attorney is effective the moment you sign it and survives even if you become disabled or incapacitated.

So, is it dangerous to have a surviving power of attorney and give your agent immediate authority to act on your behalf? Does it make more sense to create a springing power of attorney that only gives your agent authority to act when you really need the help? Now that you’re digging through your desk door in a panic, trying to decipher if your powers of attorney are springing or surviving — relax. The answer is that it depends.

Although Arizona recognizes springing powers of attorney, we see a general trend away from the use of springing powers. Legal standards of capacity are different then medical standards of capacity, so not all doctor’s letters are created equal. Even with a notarized doctor’s letter, it is not uncommon for a financial institution to object that a springing power of attorney has not, well, sprung. There is at least one state, Florida, that does not recognize springing powers of attorney in any form. A general consensus among practitioners seems to be that though springing powers can be used in some circumstances, they should not be the default.

Our office drafts both springing and surviving powers of attorney for our clients. And before we draft a power of attorney, it helps to learn about our clients’ health and family relationships. Making a thoughtful decision about selection of your agent is a critical part of preparing a power of attorney that will serve you well. In some cases, where there is a history of family conflict or a client has complex business or financial arrangements, there may be good reasons to create a springing power of attorney. In other cases, springing powers of attorney can be problematic and create hurdles that may make it difficult for an agent to act when the call for help comes.

So which is the right answer for you? Here’s a quick question for you to consider: do you completely and implicitly trust the person you are naming as agent? If your answer is “yes,” then it should not cause any problem to give them immediate authority to act. If the answer is “no,” then we need to talk about your choice of agent. Think about it: if you do not trust them enough to give them immediate authority, then perhaps they are not the right agent for you.

It’s easy to be glib, however, and a lot harder to actually live your life. Sometimes there are not good choices. Sometimes people may simply not be comfortable with an immediately effective power of attorney. When we prepare your estate plan, you should talk through your concerns and preferences — the point of signing a power of attorney is to give you peace of mind, not to make you more anxious.

Durable Powers of Attorney Are Important But Dangerous

APRIL 26, 2010  VOLUME 17, NUMBER 14
A power of attorney is one of the most important, powerful and dangerous documents you will ever sign. Why is it important? Because your family has no inherent right or power to handle your finances in the event that you become incapacitated. Why is it dangerous? Because it is literally a license to steal.

Of course the agent named in your durable power of attorney is not supposed to steal from you. In fact, he or she can go to jail for doing so. But the whole point of the power of attorney is to make it easier for someone to handle your finances without court oversight, and without having to answer to banks or others. Too often agents abuse those powers of attorney.

So why is it important for you to sign a power of attorney? Because the alternative is, for most people, even more disturbing. Your family members and even your most trusted advisers are not able to handle your bank accounts, pay your bills, buy or sell property or protect against abuses by others — unless you have given them authority to do so in an appropriate document. That usually means a power of attorney.

There are alternatives, of course. You could create a living trust, name a successor trustee and transfer your assets into the trust. That may make it a little bit easier for your successor to handle your assets, but it does not provide any additional protection. You could simply add a trusted person to the title on each of your accounts — but that provides even fewer safeguards, and exposes your property to claims leveled against the now-joint owner of your assets.

Or you could simply hope never to need anyone to act on your behalf. Then when someone needs to act they will have to go through the process of securing a conservatorship over your estate (what some states call a guardianship of your estate). That provides better protection, but perhaps at a greater cost than you want to incur — and it means the court, rather than your family member or trusted adviser, having the ultimate authority.

That is why almost everyone we counsel ends up signing a durable power of attorney. That is also why it is so critical to make sure you have selected your agent carefully, warned them about the limitations on their authority, and provided them enough information so that they can act appropriately.

Want to know more about durable powers of attorney? Check out our new White Paper on durable powers, prepared by us for our friend and colleague Slade V. Dukes, Program Fellow for the Stetson University College of Law‘s Elder Consumer Protection Program. While there look at our White Papers on other topics, too, including Estate Planning, Guardianship and Long Term Care Planning.

Advice On Making Health Care Decisions For Someone Else

AUGUST 10, 2009  VOLUME 16, NUMBER 50 

When you name someone as your health care agent, you literally entrust them with life-and-death decisions. When you are the agent the job can sometimes seem overwhelming.

Sometimes health care decisions must be made by someone who was not even designated in a power of attorney. A “surrogate” decision-maker (usually, but not always, the closest family member) is often empowered by state law to act when the patient has not made a specific choice. Few patients have had specific discussions with their agents about their health care wishes, and those who have not gotten around to signing advance directives are even less likely to have given any direction.

Although thousands upon thousands of people make health care decisions for someone else every year, there is little help or direction available for the agent or surrogate. Lawyers may be familiar with end-of-life care and decisions, but they seldom get involved — and may be an expensive way to facilitate decisions even if they are available.

We can offer some general advice and a pair of printed resources for those making health care decisions for someone else. First, a few suggestions:

  • Talk to the person who has named you as agent about his or her wishes. Sooner is better than later, but even a seriously ill, demented or incapacitated patient might be able to give some direction.
  • If you know you have been named as health care agent, ask for a copy of the power of attorney. It might include provisions that surprise you, or that you need clarified.
  • When you have to begin using the health care power of attorney, make sure you get all the information you need. Talk to doctors, nurses and caretakers. Explain why you need to have your questions answered, and insist that you get them answered.
  • If you do not fully understand the medical issues involved in a given procedure or test, tell the providers you need more information. Do not hesitate to get a second opinion when you are uncertain what you should be doing.
  • Remember that you are not applying your own standards to the decision, but those of the person for whom you are acting. This can be the most difficult part of handling a health care power of attorney or surrogacy. The law recognizes — and favors — what it calls “substituted judgment.” That means that you are expected to substitute the patient’s judgment for your own, not the other way around.

There are at least two good printed resources for a health care decision-maker to consult. Both are online and free. We regularly recommend these to our clients (and their families):

Some Advice About Selecting Fiduciaries For Your Estate Plan

APRIL 20, 2009  VOLUME 16, NUMBER 37

When it comes time to complete estate planning, our clients usually have clear ideas about who should receive their property, what health care decisions they would want made — even how they feel about cremation, burial, organ donation and most of the other issues that must be addressed. What stumps more clients than any other issue? Who to name as trustee, personal representative (what we used to call an “executor”), and agent under health care and financial powers of attorney.

Some of the common questions we hear from clients about whom to select:

Is it acceptable to name a child who lives out of state? Yes, at least in Arizona, which does not require in-state residency for any of the various fiduciary roles. With e-mail, fax machines, overnight delivery and other modern communications options, there is usually little difficulty for your son on the east coast (or even your daughter in Japan) to communicate. In fact, we frequently observe that we may have an easier time communicating with your the Iowa sister you named as agent than your nephew who lives on the east side of Tucson.

There is one small exception to that rule, and it is more practical than legal. We generally counsel that the ideal health care agent should live near you. Reviewing medical records, talking to doctors and caretakers, and developing a clear picture of your condition is much easier for someone nearby.

Can I name several, or all, of my children as co-agents, co-trustees, etc.? Yes, though we may try to discourage you from naming multiple fiduciaries. To the extent that you are trying to avoid family disputes, it is our experience that giving everyone equal authority tends to encourage disagreements. We will probably suggest that you might want to name your daughter (the banker) as financial agent, and your son (the nurse practitioner) as health care agent — and each as back-up to the other. If you really want to give them joint authority, though, there is no legal reason not to do so.

Speaking of which, is it better to name different people to health and financial roles, or give the same person authority over everything? There is no clearly correct answer. You know your family (and their strengths and weaknesses) much better than we do. If there is one person who is capable in all areas, by all means give that person authority as health care agent, financial agent, personal representative and trustee. You can segregate the roles as a means of providing checks and balances, or to give everyone reassurance that you value their input.

Do I have to tell everyone involved who will have which authority? No. But as a practical matter, we encourage you to do so. We want your daughter to realize, for instance, that she is the one who needs to make arrangements if something should happen to you. We hate to see someone show up, ready to act — and then find out they have no role. That creates confusion, and obviously can engender hard feelings.

We hope that you will share your estate planning documents with all your family (and any non-family members named as trustee, agent, or personal representative). There is no legal requirement that you do so, but it does increase the likelihood that any problems can be worked out while you are still alive, competent and in charge of your own decisions.

©2017 Fleming & Curti, PLC