Why a POA Matters – Part 3

In this third blog post of three I explain the types of scenarios we have seen in our office in which a prospective client has a power of attorney, just not specific enough to allow the agent to take the action needed.

As I explained last week, a document that contains general language, such as  “the agent can do anything the principal can do” won’t be enough.  Third parties presented with this type of document won’t typically honor it.  The document must be much more specific.

For example, the New Jersey power of attorney statute has a section which covers banking transactions.   Making reference to the statute instead of listing each banking power in detail is permissible and common.  The statute applies to banking institutions defined as banks, savings banks, savings and loan associations and credit unions.  Brokerage firms, however, are not covered by this section.  If I have a money market account, which is held in a bank rather than a brokerage firm, the POA must have other language covering these types of accounts.  Otherwise, my agent will be unable to do anything with those accounts.

Retirement accounts can also be problematic for agents using a POA without the right language.  While these types of accounts can be held in banks (eg. CDs), they are more commonly held in brokerage firms invested in stocks, bonds and mutual funds.  If we are guiding families thru a medical crisis in which assets need to be spent down before applying for Medicaid, we will need the agent under POA to quickly access, spend down and possibly close these accounts.  

Even if I have my spouse’s password to gain access online to withdraw funds on her behalf, that doesn’t legally give me the right to do so.  If I need to close accounts in her name (because I am applying for Medicaid benefits to cover long term care), a POA with the right language will be necessary.  Likewise, if she has life insurance with cash surrender value.  I will need specific language in the POA before I can surrender the policy, change the ownership or change the beneficiary.

When we are faced with a POA that doesn’t cover what we need and the principal no longer has capacity to sign a new one, the only option is a guardianship action.  This legal proceeding is expensive and time consuming,  exactly at a time when we are trying to work quickly.  The delay in getting a guardian appointed may also delay an ability to protect assets not only for the individual but his or her family as well.

It is the reason why a detailed power of attorney should be a document every adult should have because we never know what the future holds.