Taking Control of Aunt Gertrude’s Estate

           If you have been following our story of Aunt Gertrude and her niece  and attorney-in-fact, Milly, you have heard me spin some real yarns about what Milly has done. Today, let’s look at what could happen after Aunt Gertrude dies.
           Suppose Aunt Gertrude had trusted Milly for years and that for years Milly was trying to do all she could to help her dear Aunt. Then, a few years before Aunt Gertrude passed away, two events happened which changed everyone’s life forever. First, Aunt Gertrude was diagnosed with an incurable disease which would eventually take her life and, in the meantime, would steal her ability to reason and think logically. At the same time, Milly was in an accident which was not life threatening, but impaired her ability to make a living.
           Milly continued serving as Aunt Gertrude’s attorney in fact, even after her accident. But now, Milly realized that Aunt Gertrude didn’t really understand her bank statements any more. She didn’t fully comprehend everything she was reading or listening to. And, Aunt Gertrude had over $400,000 in the bank! Milly, because of her injuries, needed money. Milly concocted an idea, and its effects are still being felt by Aunt Gertrude’s family.
           Milly took Aunt Gertrude to her attorney (ie, to Milly’s attorney, not Aunt Gertrude’s attorney) to execute two documents: A last will and testament and a power of attorney. Milly appointed herself the power of attorney, this time granting herself the power to make gifts to, what do you know, herself with Aunt Gertrude’s money. The Will left all of Aunt Gertrude’s estate and money to, what a coincidence,  herself again!
           Milly spent the next two years systematically caring for Aunt Gertrude’s needs with Aunt Gertrude’s money as well as writing herself checks and depositing them into her own account. When Aunt Gertrude died, there was barely enough left to bury her.
           This may sound like a cheap dime-store detective novel, but it happens every day! If you or someone you know is being cared for by an attorney in fact, commonly referred to as a ‘power of attorney,’ take time to look in on them. Both. The principal (the person being helped) and the agent (the attorney in fact). In most power of attorney documents, there is no oversight built in.

At Mateya Law Firm, we have worked to create an automatic oversight in the power of attorney document. We can help you avoid situations like the dear departed Aunt Gertrude.  Feel free to contact us, we welcome comments and questions.

Power of Attorney: Oversight 2

The problem inherent when appointing someone as your attorney in fact (through the power of attorney document) is oversight. Who is watching the person who you have appointed as your attorney in fact?  And if you are saying “Why, my niece is my ‘power of attorney.’ She would never do anything that would cause me harm.” If you’ve just had this thought, you need to go back to the beginning of this blog and review some of the things that my fictional character “Milly” has done to her “Aunt Gertrude.”

These characters are fictional, but I have personally witnessed everything I have written about in this blog. It’s like the old Dragnet TV show. . .”the names have been changed to protect the innocent.” Real people, usually seniors, have these real problems with the power of attorney document every day.

A simple addition to the generic power of attorney document can create a duty for your attorney in fact to report his or her actions to an independent third party. The advantages are many.

First, if your attorney in fact, let’s use Niece Milly, is purchasing cat food, a cat box, and paying vet bills from Aunt Gertrude’s account as her attorney in fact, and Aunt Gertrude does not own a cat, that’s a problem. When this purchase is reported to the independent third-party, that person will question Milly about the expense and either require her to reimburse Aunt Gertrude or take the appropriate action, including legal action which can be both civil and criminal.

Second, suppose Milly is acting appropriately towards Aunt Gertrude and each of the actions she takes and bills she pays are, indeed, for the benefit of Aunt Gertrude. If she reports to an independent third party, and that person reviews the actions and finds them to be appropriate, Niece Milly now has someone to call on to prove that she has acted appropriately in case anyone accuses her of wrongdoing.

I will explore this subject further in our next post. Thank you to all of you who have been following our blogs. Keep your questions coming, and if I may use your question publicly, please let me know so that I can share the information with everyone.

Power of Attorney Oversight

One of the questions that I get when dealing with the family members of a senior citizen is “how much control do I have, now that I’m the ‘power of attorney’ for Mom?”  First, I usually restrain myself from correcting them: “You’re not Mom’s power of attorney, you’re her ‘Attorney in Fact.’”  Next, I will often ask, “Why do you ask? What is it you wish to do?” I want to be sure that the newly appointed attorney in fact knows that I am interested in what actions they take.

The fact is, the attorney in fact who Mom appoints can do just about anything Mom can do. That is pushing the door wide open.

Can the attorney in fact move Mom from one nursing home to another?  Yes.

Can the attorney in fact cash in all of Mom’s investments? Yes.

Can the attorney in fact pay themselves a hefty fee? The PEF code, section 5609, does permit a reasonable fee, and the meaning of “reasonable” is a discussion for another time. But herein lies the biggest problem of appointing an attorney in fact. Who is there to watch what the attorney in fact is doing with Mom’s money? Unless oversight is built directly into the document requiring the attorney in fact to report to some third party, there is no one watching the attorney in fact.

The answer is simple: create an automatic oversight, right in the document, which requires the attorney in fact to report, at least on an annual basis, to a third party. A simple written recitation is all that is required. The next time, we’ll talk about what the attorney in fact’s recitation is all about, and how it protects both the Principal and the attorney in fact.

Self Help and the Power of Attorney

         I recently heard from clients who I had not seen in about eight years. At that time we had helped them with estate plans. They did not want us to draft anything other than their last will and testament. We always discuss the protective documents (living will, power of attorney, medical directives, etc.) with each estate planning client, but these clients wanted to take care of the other documents themselves. Essentially, they were going to go online, or to a store, to get a form or a ‘document kit’ and fill-in-the-blanks on their own ‘one day soon.’

         One day soon never arrived.

         I met with them at the nursing home where one spouse was convalescing from a near-death event. Now they need these protective documents as quickly as I can draft them. And therein lies the problem. . .

         The Power of Attorney is a document that I compare with insurance. You buy insurance, pay the premiums and make sure your policy is close at hand in case you ever need it.  But you hope you never need it. You should think of the Power of Attorney document in the same way. You prepare for the worst case scenario and then hope it never happens.

         “What if I can’t take care of my own business, pay my own bills, because I am in a hospital bed recovering from an accident? Who will step in for me?” Those are the questions you should ask yourself. Now, before the need arises.

         Self-help forms are fine, and you can fill them out yourself. So long as you know everything I know (and by the way, I’m a lawyer). Without this specialized knowledge of the law, the presumptions in the law, and the duties and obligations of individuals, you may innocently fill in those forms in a way that is not good. In the legal world, we often jokingly refer to such forms and will kits as “The Attorney’s Full Employment Act.”  One lawyer could have been hired to properly execute estate planning documents. Instead, when things go awry because of badly drafted documents, and several beneficiaries think they are ‘entitled’ to a better position in an estate (or to ‘Grandma’s checkbook’), then all of the family members will hire attorneys to fight it out. “The Attorney’s Full Employment Act.

         My clients were fortunate that they were able to call me a second time. Most aren’t that lucky. Most end up wishing they had done the right thing. But it was too late. Don’t make the same mistake. Take care of these very important steps now, ahead of time.

When the Power of Attorney Acts Badly. . .Now What?

        When Aunt Gertrude appointed her niece Milly to be her attorney in fact through the Power of Attorney document, she never dreamed she would have to consider what to do if she suspected her niece was not doing the right thing. “That’s Milly. . .she would never do anything to hurt me,” Aunt Gertrude thought.“Why, I’ve known her since she was born. She’s family” So Aunt Gertrude didn’t ask the attorney if there was any sort of “oversight” built in to the Power of Attorney document they were both signing at the attorney’s office that day. She didn’t think she would need it.

        The truth is, when anyone executes a Power of Attorney document and appoints their niece Milly, their son, or their best friend, they are putting their trust in that person. The attorney in fact does not have a duty to report their actions to anyone, unless the Power of Attorney document they sign has some oversight built into it. And, sadly, the Power of Attorney documents which 99% of us have signed do not have any oversight built into them.

        Here in the Commonwealth of Pennsylvania, we have an “Agent’s acknowledgment” which the attorney in fact or agent is required to sign. It essentially says “I promise to do the right thing.” (That may be a too-loose translation, but you get the idea)[1] The agent, however, is not required to reveal any of his or her actions to anyone.

        At Mateya Law Firm, we have changed that. We have added language which requires the agent to produce a written record of any and all the actions taken on behalf of the principal. The concept is built on the same logic as “good fences make good neighbors.”

       We would be happy to explain to you how a power of attorney document can help you, and how it can help protect against the nefarious “Niece Milly” in your life.

[1] The agent’s acknowledgement requires the agent to act for the benefit of the principal, keep assets of the principal separate from my assets, exercise reasonable caution and prudence, keep a full and accurate record of all actions, receipts, and disbursements on behalf of the principal.

What Happens When the Attorney in Fact Won’t Act?

           Mom is being cared for by her attorney in fact (the person who is appointed through the power of attorney document).  The attorney in fact tries to do his best in caring for Mom, but there is a problem. . .a sibling who doesn’t want the attorney in fact to be there to help Mom.

            Let’s suppose that our Aunt Gertrude was being helped by her niece Milly, as in our earlier discussions. Aunt Gertrude appointed Milly because she trusted her to make the best decisions for her that she could. Let’s suppose further that Milly has always acted in Aunt Gertrude’s best interests. But now Aunt Gertrude is not doing so well physically, and Milly needs to be at her home more frequently. If something prevents Milly from being there, say another family member who actually threatens Milly, what should Milly do?

            If Milly stands up to the bully, she can likely have the bully removed from the situation.

            But what if Milly is bullied herself? What if she decides, ‘it isn’t worth the fight’ to take some action to try and help Aunt Gertrude. Then what happens?

            There are a few things that could happen:

§  Aunt Gertrude could speak up for herself. If, however, the bully is there, she may be afraid to do so.

§  The bully could simply run roughshod over Milly and Aunt Gertrude, taking advantage of the situation for her own use.

§  Another family member who sees Aunt Gertrude being bullied by Milly could try to help out.

§  Or – the family member could tell Milly that if she doesn’t stand up for Aunt Gertrude, she will file an action to have Milly removed from the power of attorney document. This is a drastic (and not always successful) step, but it is a way of bringing the actions of the bully out into the open.

            The power of attorney document is meant to be a shield. When it is not used in that way, it can become as powerless as the person who holds it.

            Watch your senior citizen friends and relatives closely. Be sure that the POA document they signed is benefitting them.

Selling a Property with a Power of Attorney Document

– Why Does the Bank Want Something More?

So Aunt Gertrude has named her Niece Milly as her attorney in fact through the power of attorney document. Suppose Aunt Gertrude wants to sell her house, but because of infirmity, she is unable to go to the bank to take care of any financial arrangements, or to the realtor’s office for the closing. Is the power of attorney document she already executed sufficient to allow Milly to show up at the closing and to sign the myriad of papers required to sell a home today?

The answer is “probably.”

Recently (within the past two years), some banking and other financial institutions are requiring very specific language in a power of attorney document in order to complete real estate transactions. At first blush, the document the bank is handing you looks nearly identical to the fully executed power of attorney document you handed to them (just before they refused it).  These institutions are trying to protect themselves.

If Aunt Gertrude is not careful, she may not be able to sell her house after all. Not because she doesn’t want to sell it, or because she doesn’t have a willing buyer, or because the buyer does not have the money. No, it could be because the power of attorney document, though it was thoroughly written and is perfectly legal, does not make this particular financial institution happy.

So what is the moral of the story? If you or a loved one is selling or buying real property (i.e., real estate with or without a building on it), show the power of attorney document to the lender at least thirty days in advance of the closing date.  That way, if your lender wants to have you execute their own version of a power of attorney document, you will have time to take the “special” document to your attorney for his or her review and execution, and the closing date will not have to be rescheduled (and the sale of Aunt Gertrude’s house).  

Keep sending us your feedback. We will try to incorporate some of your questions into the upcoming adventures of Aunt Gertrude and her niece Milly.