Homemade Powers of Attorney can create expensive legal problems

I ran into a situation recently that I thought I’d share with my readers since it’s the type of thing that happens over and over again. The Elder person is living in New Jersey but owns real estate in another state that needs to be listed or sold because he is applying for Medicaid to pay for his nursing home. The person has Alzheimers Disease and no longer has capacity to sign legal documents. The person who takes care of everything for him up here in New Jersey holds a power of attorney that they made using an “internet form.” It is titled “General Durable Power of Attorney Effective Upon Execution,” and was signed by the elder a few years ago in front of witnesses and a notary.

It sounds like this document gave authority to the agent right away, right? The problem is that the very first paragraph then says ” I ____ designate ____ to act for me, if I should become disabled or legally incapacitated. This document shall become effective upon the date of my disability or legal incapacity and shall not otherwise be affected by my disability or incapacity.” The first sentence creates a Springing Power of Attorney. The second sentence is a mixture of language from Durable Power of Attorney and Springing Power of Attorney, an obvious conflict.

The named agent found that they had to produce current doctors’ opinion reports attesting to the elder’s incapacity. The agent has lost weeks and weeks of time gathering this evidence and submitting it to insurance companies, banks etc. for legal review.

And there is another problem: in the state where the property is located,  springing powers of attorney are not valid. The agent learned this when they hired the real estate attorney there. So in order to sell the property, it will probably be necessary to file a guardianship action. And generally speaking, you can’t initiate a guardianship action in one state if the individual is permanently residing in another state …. you initiate it where the individual resides and then have to go through a separate set of proceedings in the other state. Needless to say this has all created a complicated and potentially expensive legal tangle that involves two states and two lawyers and substantial delay.

As I like to say, careful planning [with legal advice] can prevent a crisis.

Call us for advice on estate planning and long-term care planning … 732-382-6070.


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