Durable powers of attorney, as well as other legal documents, seem to go on for many more pages than necessary. This especially seems odd in the case of durable powers of attorney which are simply delegations of legal rights and powers from one person to another. Why can’t I simply say:
I, Harry S. Margolis, hereby appoint my wife, Susan, to act in my place on all legal and financial matters.This power of attorney shall not be affected by my subsequent disability and incapacity.
And be done with it? Of course, I’d have to sign the document too.
We recently ran across a durable power of attorney along these lines. Here’s what it said in relevant part:
KNOW ALL MEN BY THESE PRESENTS, that I, ___________, currently residing at _______________, and having a federal tax payer identification number of _____________, hereby appoint my wife, ______________, of ____________________, to be my true, sufficient, and lawful attorney, for me and in my name and for my use to have full authority to have access to all of my medical insurance records, my Medicare insurance records, my Medicare benefits, services and my Medicare account, and generally, to do all acts and take all steps which in her judgment are necessary, convenient or expedient with respect to my Medicare medical coverage and benefits, hereby giving my said attorney full power to act for me and in relation to my affairs, business, as fully and with like effect as I could act as if personally present, and hereby ratifying and confirming all the acts of my said attorney done by virtue and in pursuance of these presents.
While short and to the point, this is an odd document for a number of reasons. First, although it provides a broad grant of powers at the end, it focuses primarily on Medicare. It’s not at all clear why it does so. Second, in contrast to its admirably short length, this power of attorney obscures its purpose with legalese: “Know all men by these presents, . . .” “. . . by virtue and in pursuance of these presents.” What does it mean by “presents”? According to one online legal dictionary, it simply means “this document.” A blogger on legal drafting describes the use of “know all men by these presents” as “beyond fatuous.” No doubt, whoever drafted the durable power of attorney that we are examining simply felt that by making it legalistic, it would have more power.
The third problem with this document is that it’s too short. Unfortunately, while a simple, broad grant of powers should work fine, the reality is that individuals and institutions (meaning banks in most cases) look for specific provisions empowering the agent to take the action he intends to carry out. As a result, durable powers of attorney often include separate paragraphs covering the following:
- Tax powers to pay taxes, appeal tax decisions, file returns, and view old returns. The power must be specific as to the years it covers.
- Banking powers. This can include the right to sue institutions that don’t honor the power of attorney, which can, unfortunately, be a problem.
- Powers over real estate, including the power to lease, convey or mortgage property.
- Powers to borrow or to lend.
- Powers to make gifts. These often restrict the gift-making ability to the annual gift tax exclusion amount, currently $14,000. This restriction can be a problem when families seek to make transfers for long-term care or tax planning purposes.
- Estate planning powers. While an agent under a power of attorney may not execute a will, she can be empowered to create, amend or fund a trust.
- The power to bring a lawsuit or to settle one.
- The right to make payments on behalf of dependents of the person executing the power of attorney.
- The right to make decisions about and withdrawals from retirement accounts.
- Health care powers. Not the right to make health care decisions, which should be in a health care proxy, but the ability to pay for care and to file and contest insurance claims.
The list can go on and often does as attorneys add new provisions to take into account circumstances they have run into in their practices. In addition to this list of powers, the durable power of attorney may be used to nominate guardians and conservators. It should also contain a provision indemnifying any institution that acts pursuant to the document. Otherwise, financial institutions may be reluctant to act without proof of the power of attorney’s continued effectiveness.
Make sure your durable power of attorney contains these elements. If it doesn’t, it’s probably time to sign a new one. It may be time anyway because financial institutions, for no good reason, are more likely to honor durable powers of attorney signed recently than those that are older.