A Power(less) Power of Attorney

by Anita Schnee, Attorney at Law

Suppose your friend wants you to take care of his business if he needs you to. He makes you his power of attorney by using a document that he found, free on the internet, which came straight out of Arkansas law. You may have noticed, though, that the document we use for our clients is twice as long and costs more than zero. You are wondering why anybody would pay for that, when they can get a legally approved document for nothing.

The short answer is that banks tend to write their own rules.

The long answer can be found in a hypothetical example that is unfortunately drawn from real life. Suppose your friend suffers a head injury and needs nursing home care. That would cost him around $5,000 a month. Your friend and his wife only get around $2,500 a month from Social Security. Medicare wouldn’t cover what he needs, and Medicaid, which would, requires that your friend must own no more than around $2,000. He gets too much for Medicaid, but not enough to pay for care. What to do?

That’s where the power of attorney comes in. Medicaid rules permit setting up a trust that would receive and hold excess income. Your friend can’t do that because of his head injury, so he needs you to do it for him. You take your friend’s power of attorney document to his bank – and the bank says “no.” The document doesn’t give you the specific power to set up trusts on your friend’s behalf.

But how can this be? The Arkansas legislature has provided the public with a document that is supposed to do the job!

The short answer, again, is that banks are conservative institutions. If they decline to take what they think is a risk, then that could be that as to that bank. A bank like that may say that the Arkansas power of attorney document only provides powers that are too general.

If you were to get a power of attorney through us, our document contains around 270 words on the trust issue alone. That language permits agents to set up trusts of any kind, specific examples of which are provided and which include the specific trust your friend would need. Compare that to the relatively meager language in the Arkansas document.

But if you are stuck with the meager language, your options to help your friend are meager too. One option would be to go to the trouble of finding a more-cooperative bank, closing your friend’s existing bank account, opening a new account with the other bank, setting up the trust, and getting Social Security to change the deposits.

If you can’t find another more-cooperative bank, though, you would need to get a guardianship for your friend. Guardianship proceedings cost around $5,000 and, while you and your friend were waiting for the court’s approval – let’s say two months – it would cost your friend the $5,000 a month to pay the nursing home.

So, what might look like a “free” power of attorney document could end up costing your friend as much as $15,000.

There is a third option. If your friend is in good enough health, get him to call us for one of our documents. What he would pay for that is a fraction of what he might be exposed to with his current “free” document. That document is a false economy that could be hiding some unpleasant surprises.

A false sense of security is not what you want to rely on in an emergency.

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Anita Schnee

Anita Schnee

Anita Schnee has been a lawyer for around thirty years, half of those in Fayetteville. She has served as judicial law clerk in the state and federal systems, taught legal research and writing at the University of Arkansas Law School, and is now pleased to assist the Estate & Elder Law Planning Center on issues affecting elders and the disabled.
Anita Schnee

Anita Schnee

Anita Schnee has been a lawyer for around thirty years, half of those in Fayetteville. She has served as judicial law clerk in the state and federal systems, taught legal research and writing at the University of Arkansas Law School, and is now pleased to assist the Estate & Elder Law Planning Center on issues affecting elders and the disabled.
This blog does not provide legal advice. Please consult us for specific guidance. Rights to this article are shared only with users who are part of the Eldercounsel organization. For an attorney in your state, please click here.

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