Securing a Power of Attorney in New York

Who should look after your assets when you cannot?

The following case is true, even though the names have been changed. 

After John Smith began suffering from dementia, he needed nursing home care at a cost of $160,000 per year. His bank accounts and other liquid assets amounted to approximately $500,000; but because his children didn’t have a durable power of attorney, they had no way to access any of it. It wound up taking several months before the children were appointed guardians, which delayed their ability to do Medicaid planning. This cost their father four additional months of private nursing home care—more than $50,000. They also had to pay for the cost of a guardianship proceeding and ask the court for approval to implement Medicaid planning. This cost more than $10,000 in legal fees and court costs to accomplish.

It was, says elder law attorney Vincent J. Russo, managing partner at Russo Law Group in Garden City, “a disaster.”

More so because it was preventable with a power of attorney. A POA gives legal authority to another person, usually called an agent, to make financial decisions for you, the principal of the document. 

That means it’s critically important to choose the right person to serve in the agent role. Most people choose a spouse or child, says elder law attorney Michael J. Amoruso of Amoruso & Amoruso in Rye Brook; but that can be fraught. Choosing one child over the others, or over the spouse, may cause tension within the family. 

“The primary factor should be: Who has strengths in property and financial management?” Amoruso says. “Who will never see your assets as theirs, and will do what you give them authority to do in your best interest? There are a lot of headlines out there where we see the term ‘elder financial abuse.’ More often than not, a parent puts a child on an account, and the child starts to feel entitled and says, ‘Mom would want me to have some of the assets.’”

The decisions don’t end with who should be your agent. “Not all POAs are created equal,” says Nancy Burner of the Burner Law Group.

There are essentially two types of POA, says Russo: durable and nondurable. As the names imply, a durable POA is valid for the principal’s lifetime; a nondurable POA is terminated when the principal becomes incapacitated. “It is important to sign a durable POA, because you want your agent to step in when you become incapacitated,” Russo says. 

In addition, a principal can give an agent broad or limited authority. New York State has adopted a statutory power of attorney form with detailed requirements. “If these specifications are not followed exactly, the document will likely be rejected for not complying with the statutory form,” Burner says. For example, the law regulating powers of attorney states that if a particular power—the right to cash checks, for instance, or open mail—is not specifically listed in the document itself, the agent does not have that power. 

For that reason, elder law attorneys often add a list of powers to the “modifications” section in the document that may be necessary to assist with, say, long-term care planning and the Medicaid application process; it could include the creation, funding, amending or termination of trusts, or gifts to the principal’s loved ones. “It is also important to note that a Statutory Gifts Rider may need to be executed in addition to the power of attorney form to ensure the agent has the authority to engage in this type of planning on behalf of the principal,” Burner says.

According to Amoruso, the primary mistake most people make is being pennywise and pound foolish. “Downloading the state’s statutory document off the internet is cheap, but when a crisis hits it may not be adequate,” he says.  

But worse is not having a POA at all. “If you don’t have a POA, no one, even if you have been married 50 years, has a legal right to make financial decisions for you,” Russo says. “Your spouse would have to go to guardianship court. You want to avoid it. In my practice, we see what can happen because of some event—a car accident, dementia—and a POA is so important. It’s like that old American Express commercial—don’t leave home without it.” 

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