Answer: Yes, there is a possibility that even though a General Durable Power of Attorney has been signed, there may be certain transactions that cannot be completed. A Power of Attorney is a document in which the Principal can designate an Agent to act on his or her behalf with respect to financial and business matters. Even a validly signed Power of Attorney will limit the Agent to the specific powers listed in the document. In other words, a Power of Attorney is only as good as the powers listed within the document.
For example, the statutory gift rider on the Power of Attorney must be signed in order to transfer an unlimited amount of assets out of the Principal’s name. This power is commonly needed in the context of Medicaid planning. If the statutory gift rider is not included within the document or is unsigned by the Principal, then assets cannot be transferred out of the Principal’s name. In practice, we commonly review older Powers of Attorney and find that the document limits the Agent to a specific gifting amount, such as $10,000.00. If the Principal needs long term care in a nursing facility and owns assets above the Medicaid allowance, so long as the Principal has executed a properly drafted Power of Attorney, planning in the eleventh hour can still be done to preserve some or all of the assets. If the Power of Attorney limits the Agent’s ability to gift, the planning cannot be done. In this case, if the Principal has already lost his or her capacity, the Agent will have to commence a Guardianship proceeding to have the power to make the requested transfers. A Guardianship proceeding will be costly and time consuming for all involved. This would bring a normally private matter into a public forum. Further, the guardianship judge may not grant the transfer of assets out of the individual’s name which would result in the need to spenddown all of the assets prior to applying for Medicaid.
In our practice we see many clients coming to us with a false sense of security that any and all transfers would be possible under the Power of Attorney that was signed many years ago. This is why it is important to meet with a professional who practices in this area and review your estate planning documents every few years in case an update is necessary.