Free powers of attorney – bargains or potential disasters?

A free power of attorney is very much like free firearms, free explosives, and free hazardous chemicals. Each item may be useful when someone uses it properly, but it would be irresponsible to deliver such things to people randomly. This article explains why it is dangerous for people to sign “off-the-shelf” powers of attorney distributed by non-lawyers. The article also explains why nursing homes and other organizations that distribute free powers of attorney may expose themselves to lawsuits.

Authority Crisis Without a Power of Attorney

An authority crisis arises when someone, who does not give a power of attorney to another person, becomes too disabled to manage his or her personal business. The U.S. Constitution requires the person’s spouse or other family members to ask a court for guardianship authority to take control of the disabled person’s legal affairs. The Constitution also requires the court to provide notice of the preceding to the disabled person because Americans value personal liberty very highly. However, the guardianship procedures are time-consuming and expensive. The procedures also disrupt the person’s privacy.

We Recommend Powers of Attorney

We recommend that most people make powers of attorney to avoid a guardianship crisis. A power of attorney is a document that you can sign to allow someone else to help you manage your personal business in the future. A power of attorney can be unlimited or limited, and it can take effect immediately or when you become disabled.

A Power of Attorney Can Be Dangerous

If you give someone a power of attorney, the person (called the “attorney-in-fact” in Indiana) may be able to take almost every legal action for you that you can do for yourself. For example, your attorney-in-fact can open and close bank accounts, buy and sell real estate, and commit you to all kinds of agreements. That is why this article began by comparing a power of attorney to firearms, explosives, and hazardous chemicals. Your attorney-in-fact can use your power of attorney can protect you, but an irresponsible or unethical attorney-in-fact could also use it to hurt you.

Powers of Attorney Can Make Theft Easier

Corrupt people take advantage of a senior citizens in every community. It may take a lot of work to convince someone to give money or property away, so some crooks look for shortcuts. One of the easiest ways to take a person’s property is to convince the person to sign an unlimited power of attorney. The court may still be breaking the law by using the power of attorney, but when has the law stopped crooks from breaking it?

Not All Powers of Attorney are Appropriate

We have also explained in previous articles that there are several different kinds of powers of attorney for different purposes (see “Power of Attorney – And Estate Plan’s Most Powerful Tool” and “Are All Powers of Attorney Created Equal?” on our website). A nursing home resident may need a specially designed power of attorney that authorizes family members to protect assets.

A standard power of attorney that simply refers to the Indiana Power of Attorney Act (Indiana Code Article 30-5) includes a power limit that interferes with asset protection. The power limit in Indiana Code § 30-5-5-9 protects wealthy families (people with more than $11.4 million in 2019) from expensive gift tax issues, but the protection prevents most ordinary people from making gifts to protect assets from nursing home costs. So, a free power of attorney that does not specifically override the statutory gift limits prevents families from protecting their disabled family members’ assets from long-term health care costs.

A Free Power of Attorney is Too Good to Be True

This old saying probably applies to a free power of attorney: “if something seems to be too good to be true, it probably is.” However, in some cases, a free power of attorney may be much worse than that. It may be tragic.

More Information

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About the Authors

Jeff R. Hawkins and Jennifer J. Hawkins have practiced in the areas of trusts, estates, and elder law for over 26 years. Both lawyers are Trust and Estate Specialty Board Certified Indiana Trust and Estate Lawyers and active members of the Indiana State Bar Association and National Academy of Elder Law Attorneys. Both lawyers are admitted to practice law in Indiana, and Jeff Hawkins is admitted to practice law in Illinois. Jeff is also a registered civil mediator, a Fellow of the American College of Trust and Estate Counsel and the Indiana Bar Foundation; a member of the Illinois State Bar Association and the Indiana Association of Mediators; and he was the 2014-15 President of the Indiana State Bar Association. Find more information about these and other topics at www.HawkinsLaw.com. © Copyright 2019 Hawkins Law PC. All rights reserved.