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Obtaining Power of Attorney for Parents

As parents age, it becomes increasingly important to plan for the possibility that they may need assistance managing their financial affairs or making healthcare decisions. Without proper legal documentation, adult children may face significant obstacles in handling their parents’ needs, especially in cases of cognitive decline or medical emergencies.

A power of attorney (POA) is a legal document that designates a trusted individual to act on another person’s behalf in financial, medical, or personal matters. Obtaining a POA before a crisis arises ensures a smooth transition of responsibilities and prevents costly legal battles.

What Is a Power of Attorney?

A power of attorney grants legal authority to a designated person, known as an agent or attorney-in-fact, to make decisions on behalf of another individual, known as the principal. The scope of authority varies depending on the type of POA.

Types of Power of Attorney

  • Financial Power of Attorney – The agent can manage financial matters, such as paying bills, handling investments and managing property.
  • Medical Power of Attorney (Healthcare Proxy) – Authorizes the agent to make healthcare decisions if the principal becomes incapacitated.
  • General Power of Attorney – Grants broad authority over financial and legal matters. However, it typically ends if the principal becomes incapacitated.
  • Durable Power of Attorney – When “durable,” the POA remains in effect even if the principal is unable to make decisions due to illness or injury.
  • Limited (or Special) Power of Attorney – Provides authority for a specific transaction or period.

Choosing the right type of POA ensures parents receive the support they need while maintaining as much independence as possible.

Steps to Obtain a Power of Attorney for Your Parents

1. Start the Conversation Early

Many families delay discussing estate planning because of discomfort around aging and incapacity. However, waiting too long can result in complicated legal hurdles if a parent becomes unable to grant POA due to cognitive decline.

Approach the conversation sensitively, emphasizing that a POA protects their wishes and prevents unnecessary stress. Highlighting real-world examples of families who struggled without one may encourage proactive decision-making.

2. Determine the Right Type of POA

Assess your parent’s needs and preferences to determine the most appropriate POA. A durable financial POA may be suitable if they require help managing finances. A medical POA is essential to ensure that future healthcare decisions align with their wishes.

3. Choose a Trusted Agent

The person granted POA should be responsible, financially stable and able to handle difficult decisions. While many parents choose an adult child, they may also select a trusted family friend, financial advisor, or attorney.

The agent should be someone who:

  • Understands the parent’s values and preferences
  • Is capable of managing finances and healthcare decisions responsibly
  • Will act in the parent’s best interests without personal bias

Naming an alternate agent is also recommended if the primary agent is unable or unwilling to serve when needed.

4. Draft the POA Document

A POA must be properly drafted and executed according to state laws to be legally valid. While online templates exist, they may not provide the necessary legal protections. An estate planning attorney ensures that the document:

  • Complies with state-specific legal requirements
  • Clearly defines the agent’s powers and limitations
  • Includes provisions to prevent abuse or mismanagement

5. Sign and Notarize the POA

Most states require signing the POA in front of a notary public. Some states also require witnesses, particularly for medical POAs.

Once signed, distribute copies to relevant parties, including:

  • Financial institutions (for financial POAs)
  • Healthcare providers (for medical POAs)
  • Family members involved in caregiving

Keeping the original document in a secure but accessible location ensures that it is available when needed.

What Happens If No Power of Attorney?

If a parent becomes incapacitated without a POA in place, family members must petition the court for guardianship or conservatorship. This process is:

  • Time-consuming – Court proceedings can take months, delaying essential decision-making.
  • Expensive – Legal fees can accumulate quickly.
  • Emotionally challenging – Family members may disagree over who should be appointed guardian.

A properly executed POA prevents court involvement and ensures that a trusted individual is legally authorized to act on the parent’s behalf.

Common Misconceptions about Powers of Attorney

“I’ll Just Handle It when the Time Comes”

Many adult children assume they can automatically step in and manage a parent’s affairs in an emergency. However, financial institutions and healthcare providers will not grant access to accounts or medical records without a POA.

“A Will Covers Everything”

A will governs estate distribution after death—it does not grant decision-making authority during a parent’s lifetime. A POA is essential for managing affairs while they are still alive.

“POAs are Only for the Elderly”

While POAs are critical for aging parents, they are equally important for adults of any age. Unexpected accidents or illnesses can leave individuals unable to make decisions, making a POA a valuable safeguard for all adults.

Key Takeaways

A POA ensures financial and medical decision-making: Without it, family members may need to go through costly court proceedings to obtain legal authority.

  • The right POA depends on the parent’s needs: Financial, medical and durable POAs serve different purposes and should be chosen carefully.
  • A POA must comply with state laws: Improperly executed documents may not be legally valid, making professional guidance essential.
  • Without a POA, court intervention is required: If a parent becomes incapacitated without a POA, family members may need to pursue guardianship, which can be time-consuming and expensive.
  • Starting the conversation early prevents future stress: Delaying POA discussions can lead to legal complications and unnecessary burdens for family members.

Reference: A Place for Mom (Aug. 5, 2024) “A Beginner’s Guide to Power of Attorney for Elderly Parents”

How to Prepare for Cognitive Changes in Your Life

Planning for the cognitive decline that often accompanies aging can prevent expensive mistakes, says a recent article from U.S. News & World Report, “How to Minimize 4 Financial Management Disasters That Come With Aging.” Planning for cognitive decline can make our later years less stressful.

Age and Vulnerability to Financial Elder Abuse. Simple tasks like paying bills can become problematic as our cognitive abilities diminish. This also leaves people more susceptible to fraud and scammers—today’s thieves’ prey on the elderly through telephone, online, mail and in-person schemes. Add a layer of protection by having a trusted person or family member oversee accounts. A professional fiduciary or a bill-pay service could be used if no family member is available or trustworthy enough.

Freezing a senior’s credit with major credit bureaus can make it harder for thieves to steal their identity, take out loans, or open credit cards under their names.

Financial documents should be organized, and their location should be shared with loved ones. Your estate planning attorney, financial advisor and CPA should have the contact info of a trusted person who can step in to manage your affairs, if necessary. Your estate planning attorney can create a Financial Power of Attorney, so they can act on your behalf.

You can appoint a representative payee with the Social Security Administration, so another person can help you with Social Security matters.

The Death or Disability of the Family’s Financial Person. One person in the household very often runs the business side of life, paying bills, balancing checkbooks and keeping an eye on investments. If that person dies or becomes disabled, the spouse needs to be able to take over finances. To do this, they’ll need to know more than the usernames and passwords on accounts—although they’ll need to know this information as well. Regular check-ins on financial matters with a spouse and a trusted adult is a good practice.

Planning for Long-Term Care Expenses. Failing to prepare for the cost of long-term care or to protect a couple’s assets with Medicaid planning can be financially catastrophic. Medicaid can help with the cost of nursing home care. However, if the family has assets, they must be used up before the person is eligible for care. Medicaid also has a five-year lookback period, meaning any transfers or sales of assets taking place five years from the date of application will delay eligibility. An estate planning attorney can help with the use of irrevocable trusts, often referred to as Medicaid Asset Protection Trusts. There are also trusts designed to protect assets for the healthy spouse. A consultation with an estate planning attorney long before long-term care is needed is critical to avoiding this mistake.

Outliving Your Money. Experts believe nearly two-thirds of Americans nearing retirement age are unprepared for two, three, or even four decades of retirement. The past year’s skyrocketing costs of living have prevented many from adding to their savings during the end of their working lives, and many don’t even have emergency savings. Having a financial plan and an estate plan is important at every age and stage of life.

Cognitive changes don’t happen to everyone as they age. However, it is still wise to have your estate planning done long before any changes occur. Having a will and any necessary trusts created and executed while you are at full capacity allows you to be the one making these decisions.

Reference: U.S. News & World Report (June 26, 2024) “How to Minimize 4 Financial Management Disasters That Come With Aging”

Safeguarding against Financial Exploitation: Estate Planning for Cognitive Decline

In this overview of estate planning for cognitive decline, we examine signs of dementia and the role of estate planning in protecting our aging loved ones. The National Institute on Aging (NIH) article, “Managing Money Problems for People With Dementia,” sparked our discussion on estate plans and cognitive decline.

It is becoming more common for families to encounter challenges and new issues in needing to help loved ones safeguard assets from fraud and exploitation. This article shares practical strategies to protect vulnerable individuals when we notice signs of dementia.

Understanding the Risks: Fraud and Financial Exploitation

Cognitive decline, particularly associated with conditions like Alzheimer’s disease, poses significant risks for financial exploitation. Individuals grappling with dementia may struggle to manage bills, discern trustworthy individuals, and comprehend complex financial transactions. This vulnerability makes them prime targets for fraud and abuse. Here’s a closer look at common forms of exploitation:

  • Multiple Payments: Those with cognitive decline may inadvertently make multiple payments for the same service, leading to financial losses.
  • Misuse of Power of Attorney: Trusted individuals, including family members or attorneys-in-fact, may abuse their authority by making unauthorized cash transfers or mismanaging assets.
  • Undervalued Property Sales: Patients may be misled about the value of their property, resulting in sales below market value to the detriment of their estate.

Protecting against Fraud: Legal Safeguards and Capacity Assessment

To combat financial exploitation, it’s essential to understand the legal safeguards available and to assess the individual’s capacity to enter into agreements. Here are key considerations:

Legal Capacity: Contracts and agreements are enforceable only if both parties have the legal capacity to enter them. Individuals with Alzheimer’s or cognitive impairment may lack this capacity, rendering contracts voidable.

Capacity Assessment: Assessing mental capacity is crucial in determining the validity of agreements. Physicians, family members and legal experts play a vital role in providing testimony and evidence of cognitive decline.

Estate Planning’s Role in Protecting Our Aging Loved Ones

Signs of dementia are sometimes slow to appear or hard to detect. The National Institute of Aging pointed out that financial management is one of the first signs of cognitive decline affecting a loved one.

Estate planning helps prevent loved ones with dementia from losing money or property to scammers or unscrupulous people. It is crucial to establish financial powers of attorney before signs of dementia and enable a trusted family member to oversee bank accounts and pay bills for a loved one. Trusts are another tool that helps to safeguard a loved one’s assets.

Estate Planning and Cognitive Decline Key Takeaways:

  • Early Intervention: Recognize signs of cognitive decline and take proactive steps to safeguard assets.
  • Legal Expertise: Seek guidance from attorneys experienced in elder law to navigate complex estate planning and financial management issues.
  • Family Vigilance: Family members and caregivers should remain vigilant to watch for signs of financial exploitation and take prompt action to protect their loved ones.

Conclusion

Estate planning for cognitive decline requires careful consideration and proactive measures to protect vulnerable individuals from fraud and financial exploitation. Families can confidently navigate these challenges by understanding legal safeguards, assessing capacity, and seeking expert guidance. Are you ready to safeguard your loved one’s future? Schedule a consultation with our team today and take the first step towards comprehensive estate planning.

Reference: National Institute on Aging (NIH) (Oct. 3, 2023) “Managing Money Problems for People With Dementia”

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