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A General Durable Power of Attorney (GDPOA) is often suggested as a means of avoiding guardianship or “living probate.” While such a document is an important tool in a comprehensive estate plan, the GDPOA on its own, or in conjunction with just a last will and testament, may not provide the protection the author seeks.

A GDPOA is a legal document that allows the “principal” to designate another person (the “agent” or “proxy”) to conduct the principal’s business and financial affairs on the principal’s behalf. This document is intended to assist in the absence of a director or during a time when the director may be physically or mentally unable to conduct business. Since the document is “durable,” it will remain in effect and in force even if the principal becomes legally incapacitated. To be effective for real estate transactions, the GDPOA must be registered with the clerk’s office in the county where the property is located. A GDPOA is distinguished from a health care power of attorney and a limited power of attorney by its broad scope and application to a wide range of financial matters.

A power of attorney that is not durable does nothing to help you plan for disability, incompetence, or incapacity, and does little, if anything, to prevent guardianship. A power of attorney that is not durable becomes void when the principal becomes incompetent or incapacitated. Consequently, of the different forms of powers available, the GDPOA holds the most promise in disability, incompetence or incapacity planning.

However, in practice, GDPOAs can be quite weak and ineffective. Although powers of attorney are very common and the notion of GDPOA has become very popular, agents carrying power of attorney documents have not always been treated as if they were in the principal’s place. Individuals and institutions routinely reject GDPOAs upon submission. Elderlaw attorney Scot Selis writes on

“If you have ever been frustrated by an organization’s refusal to honor a durable power of attorney, you are not alone. A power of attorney allows an individual to select another person or persons to handle their financial affairs. However, many institutions financial institutions often refuses to honor a duly signed and witnessed power of attorney.

In fact, it is frustrating for an agent to find that their powers are denied or ignored in transactions on behalf of a principal. However, the rejection of a properly executed GDPOA also undermines the intent of the principal, who, in making the GDPOA, generally assumed that he was making things easy for his family. While an agent may apply to a court of appropriate jurisdiction to enforce his or her rightfully exercised powers, the prospect of having to litigate transactions that should take place in the ordinary course of business is more than frustrating. Litigation is costly and time consuming, and it was never the intention of the principal drafting the GDPOA.

The problem is so widespread that groups of lawyers have complained to lawmakers, the Attorney General’s offices and the Departments of Commerce about banks requiring the use of the bank’s own power of attorney forms and the banks refusing to honor the powers of attorney. generally legal. While these complaints have, over the years, resulted in more uniform legislation governing the GDPOA, practical problems remain.

There are a variety of reasons why a person or institution may reject a GDPOA. The most common reason given is that the GDPOA is “outdated” or too old. However, this reason is not based on any legal right, privilege or responsibility of the bank or institution. Most states allow a GDPOA that does not expire. Banks often reject these documents, supposedly based on their age.

Another reason given is that the GDPOA does not register. Registration of a GDPOA is, as mentioned, necessary for transactions involving real estate, but is generally not required for other financial transactions. However, a person or institution may require that the document be registered. However, recording may not be in the client’s best interest, especially if it is unnecessary. Once registered, the GDPOA becomes a public record, available to anyone who requests it. A registered GDPOA, certified by the county recorder, can be a dangerous instrument in the wrong hands.

Another reason often given for rejecting a GDPOA is that the GDPOA does not allow the agent authority to perform the intended transaction. This reason is based on the law, because a person or institution may be liable if the GDPOA is accepted to make a transaction not authorized by the GDPOA. In addition, if the person or institution is notified that the agent is doing something that is not permitted by the GDPOA, the person or institution that facilitates the transaction by accepting the GDPOA may be liable.

This potential liability is, of course, a huge disincentive for individuals and institutions that are asked to agree to a GDPOA. This disincentive is particularly acute when the agent seeks to close an account or liquidate a policy or asset using a GDPOA, because the individual or institution cannot know the final disposition of the funds. For example, if the GDPOA does not allow the agent to make gifts to the agent or third parties, or if state law prohibits such transactions, the institution may fear that closing an account or liquidating an asset may facilitate an improper gift. .

Aside from the reasons given, the motivations for rejecting a GDPOA are many and range from the right to the ignorant to the wrong. The proper motivations are many. Institutions may prefer the legal certainty and protection of probate court approval. In such a case, the filing of the GDPOA may actually cause or influence to cause a guardianship application. The institution may, in good faith, suspect a misuse of the GDPR. The institution may even suspect that the agent is incompetent or incapacitated.

Improper motivations causing rejection of a GDPOA include the desire to maintain and maintain control of an asset, preventing the discovery of improper asset management, undue influence by persons other than the agent, and disagreement with the use agent’s intended use of assets when the intended use is lawful However, there may be no way to distinguish proper from wrong motivation, because someone who rejects the GDPOA will never admit wrong motivation.

Difficulties in getting institutions to agree to a GDPOA add to the motives of family members seeking to control an older person’s estate. Many GDPOAs are simply replaced by a family member filing for guardianship. Diane Armstrong, PhD, testifying before the Senate Special Committee on Aging wrote:

“Most of these [guardianship] Petitions are filed by adult children seeking some control over the personal and/or financial affairs of their elderly relatives. They are battles between brothers rooted in questions of inheritance and control, often described as ‘thinly veiled contests of wills before death’. Anyone who reaches age 62 with covered assets is at risk. As one forensic psychiatrist noted about these so-called protective procedures, ‘For every $100,000 in a given estate, a lawyer appears; for every $25,000 a relative appears; and if there is no money, no one shows up’ (quoted in Harold T. Nedd’s Fighting for the care of aging parents, USA TodayJuly 30, 1998).

Equally worrisome is the fact that short they often ignore the GDPOA! The very document that most people rely on to narrow down the possibility of a court-appointed guardian is often simply ignored by the probate court. Diane Armstrong proved before the Senate Special Committee on Aging that:

“When an older person is brought to court and forced to prove their competence, we soon see that the system is broken. We have a system rife with court-sanctioned elder abuse. Why? Judges strike down protections that are have established a place in the codes. Judges ignore durable powers – the most important document each of us can create to determine our care if we become incapacitated… Judges ignore our lists of pre-selected substitute decision makers. The current system doesn’t work.

Consequently, the GDPOA does not provide full protection against guardianship. In particular, if a person anticipates the need for such protection because of the size or composition of their estate, or because of the composition of their family, or because of a lack of unity in their family, they should consult with an estate planning attorney. . familiar with trusts designed to hold and maintain control of assets and decision-making outside of court involvement or control. Such trust planning, as part of a comprehensive estate plan, can provide a more comprehensive solution than a GDPOA and a Last Will and Testament.

Regardless, there are some strategies that can help increase the chances that an individual or institution will accept a GDPOA. First, have the estate plan reviewed annually and rerun the GDPOA periodically. Second, provide institutions with copies of the GDPOA prior to any illness. Request a letter from the institution acknowledging receipt of the GDPOA, and the result of its review. With a letter from the institution that the GDPOA document will be accepted, there is a higher chance that the GDPOA will be accepted in the future. At the very least, there is always the hope that the person providing the letter is still at the institution when the GDPOA is used.

Third, run the GDPOA that owns the institution. Some banks and brokerage firms require clients to sign their own power of attorney form to allow others to handle client accounts. There is generally nothing wrong with these shortened powers of attorney as long as they do not revoke, but merely enhance the provisions of the GDPOA. If you have any questions or concerns, simply obtain a copy and have it reviewed by an estate planning attorney. Finally, add agent names to all accounts as “agent” or “proxy” before an illness occurs. Securing assets accordingly does not confer ownership rights on agents, but it does increase the chances that the GDPOA will be accepted without reservation when necessary.

But perhaps the best strategy for planning for incompetence, disability, and disability is a comprehensive estate plan that includes a trust.

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