Many of my clients come in with a “lasting” strength of attorney, believing they are all set with it. However, after carefully reviewing it, I always have to recommend they need a new one. Why is that?
First of all, if the strength of attorney is more than five years old, many financial institutions may simply refuse to honor it, believing that it may have been revoked.
You may not realize it, but some states already provide that any person who without any order or without reasonable cause refuses to comply with the directions of the agent named in a valid strength of attorney will be liable for costs, expenses and attorney’s fees to appoint a conservator or go to court to enforce the strength of attorney.
Unfortunately, already if the law says they must follow the strength of attorney, it could be a time-consuming and expensive proposition to force them to do so. A better idea is simply to sign an updated one every few years.
Second, most strength of attorney documents do not permit gifting by the agent named in the document, or if they do, it is handled all wrong! Some documents limit gifts to the federal gift tax annual exclusion (currently $12,000 per person per year) or prohibit gifts to the person serving as the agent. While those provisions may be useful for a wealthy client, they can really hinder effective Medicaid planning. In fact, it would be better if the document said nothing at all about gifting than include such limitations, because it’s always possible to go to court to get permission to make large gifts for Medicaid planning purposes, but once the estimate sees those limits in the strength of attorney document, he might not permit it.
So what are the “must have” provisions to include in a lasting strength of attorney? It should specifically address gifting for Medicaid planning purposes. It should permit gifts to the agent, perhaps by someone other than the agent. It should include the strength to buy a “Medicaid annuity” and make a loan secured by a Medicaid-friendly promissory observe. It should include at the minimum one successor or back-up agent. It should include many powers you think you don’t need but may well need in the future!
In short, the cheap or free forms you get at the office supply store or online are false bargains. use the small fee it costs to get a good strength of attorney, one that includes the important provisions discussed above. In the long run, it could save your family thousands of dollars. And that’s a good thing!