How a Durable Power of Attorney Can Help You Avoid Real Estate & Asset Protection Dilemmas

People commonly assume that because they are married they have the "automatic legal powers" they'll need in an emergency and don't need a power of attorney (POA).  In my experience, these people are tragically wrong.

Couples often put off completing estate-planning documents because they own everything jointly, have each other listed as beneficiaries on their financial documents and insurance policies, and believe that's enough. Because real estate held jointly by a married couple is subject to "rights of survivorship",  many people think they will be fine if something happens to the other spouse, however, they are not covered in case one of them becomes disabled.

For example, let's assume one spouse becomes incapacitated due to illness or accident and the couple needs to move to a handicap-accessible home, or even an assisted living facility.  Without a POA, the healthy spouse can't sell their original house on their own.  The healthy spouse would have to go to Guardianship Court to be appointed the legal representative, which takes time and money.

An esteemed colleague of mine, elder care and estate planning attorney Moira Laidlaw tells her clients that a properly drafted durable power of attorney is a necessity.  She also suggests a POA with broad gift-giving powers or rider.  This gives the healthy spouse the right to gift more than the average amount set by the IRS to themselves, children, or a trust, in order to protect assets against the large costs of the disability. 

Moira cautioned that "99% of POAs that come into my office do not include the powers clients need to implement a Medicaid Asset Protection Plan.  This is because most attorneys are not familiar with the powers clients need to navigate a Department of Social Services Medicaid application."  

A standard POA may not give a spouse the power necessary to protect assets in the event the other spouse needs to be admitted into a nursing facility.  Moira explained that if a client who owns a $600,000 home in Westchester, suffers a catastrophic illness and has to be cared for at a nursing facility at $550/day, and the spouse only has a standard POA that limits gifting to $14,000/person per year, the assets won't be divested quickly enough.  The proceeds of the real estate asset, when sold, would go toward the medical costs. 

If the disabled spouse no longer has the capacity to sign a new POA, the family would need to obtain authorization from the New York State Guardianship Court.  It could take a fully litigated trial to prove that the spouse is incapacitated and to have a guardian appointed who would then be required to report to the court on an annual basis.  The fees alone for making this change can exceed $15,000.  

All of this can be avoided by a well-drafted POA.  Moira noted that even an unmarried person with real estate and other assets should have a POA in place to instruct a friend or family member in case they are incapacitated. 

If you are concerned about estate planning or elder care, including real estate assets, please consider giving Moira Laidlaw a call.  She is an experienced and trusted attorney with the local firm of Shamberg Marwell Hollis Andreycak & Laidlaw, P.C. at 55 Smith Avenue, Mount Kisco, New York 10549.  Her phone number is 914.666.5600 ext. 336, and her email is mlaidlaw@smhal.com.