Ganson

I am often asked whether or not someone should have a power of attorney as part of their estate plan. In response, I almost always respond to the question in the affirmative. And I usually add that the power of attorney should also include a “durable” provision as well as a provision granting authority for the creation of an “Irrevocable Qualified Income Trust” aka a “Miller” trust.

My answer usually results in two follow-up questions – What do you mean by “durable” and what is a “Miller” trust.

In Ohio, a power of attorney is a legal document used in an estate plan to enable the person named as the agent (also known as the “attorney-in-fact”) to handle the everyday legal, financial, and other personal matters of the person who executed the power of attorney (also known as the “principal”) as if the principal was acting for herself. Although a power Of attorney enables the agent to act for the principal as if the principal were acting personally for the purposes described above and usually contains language that states the agent is also authorized to make decisions involving management of the principal’s health care, since there is a statutory Power Of Attorney for Health Care Decisions, I usually have the principal execute both documents – one for everyday legal, financial, and other personal matters and the other for health care decisions.

In order for a power of attorney to be valid, the principal must execute a power of attorney under the requirements set by Ohio statute. Therefore, the signing and dating of a power of attorney by the principal generally requires that her signature be either witnessed by two disinterested witnesses who witness both the principal signing the document as well as each of the witnesses at the same time or by a Notary Public who witnesses the principal personally signing the document or acknowledging her signature on the document is her signature who then will sign and place his seal on it in the presence of the principal.

Unfortunately, a power of attorney becomes null and void upon the occurrence of either the principal’s mental incompetency or death unless the power of attorney document has a “durable” provision. By including a “durable” provision in the document, the power of attorney will remain in full force and effect even if the principal becomes mentally incompetent. However, even including a “durable” provision does not extend the viability of a power of attorney beyond the death of the principal. In other words, once the principal dies, so does the power of attorney notwithstanding the inclusion of a “durable” provision and the power of attorney will no longer be able to be used by the agent.

We are fortunate in Ohio to have a statute that not only authorizes the use of a power of attorney but also has a statutorily provided durable power of attorney form to use. In years past before this statute, an attorney would develop his own form. Now, with the passing of this statute, lawyers no longer need to create their own form. All they need to do is to use the form set forth in the statute to create a legally recognized and valid durable power of attorney document.

With regard to the “Miller” trust question, a power of attorney does not usually authorize the agent to create a trust for the principal without being specifically authorized by the principal in the power of attorney document. The “Miller” trust is particularly important to include because a principal with a “Miller” trust  receives Medicaid benefits without regard to the value of the assets in the trust. Without a “Miller” trust, Medicaid rules generally require an applicant to “spend down” her assets before she would be eligible for Medicaid benefits. With a “Miller” trust, the Medicaid applicant is usually able to avoid the “spend down” requirements and still be eligible for Medicaid benefits.

Execution of a power of attorney must be done by the principal while she has the mental capacity to understand the document. It cannot be signed by a principal after she has become mentally incapacitated.

A mentally incapacitated individual without a power of attorney greatly restricts her family and loved ones ability to take care of the mentally incapacitated individual as well as carry out any estate plan goals. In addition, she has exposed her assets to creditors, the nursing home/Medicaid spend down requirement, or taxes. In addition, not having a power of attorney with a durable provision would require an incompetent principal’s family and loved ones to file an application for guardianship with the Probate Court simply to get her bills paid, not to mention many other everyday acts. 

And a guardianship is a costly, lengthy, invasive, and usually irreversible process. A guardianship takes control out of the hands of her family and loved ones and places control under the sole supervision of the Probate Court. It will be the Probate Court judge who makes a decision as to what is in the best interest of the incompetent ward, not her family and loved ones. In addition, the statutes which provide for guardianships usually will not permit many of the planning techniques necessary for the protection of assets for the benefit of individuals other than the incompetent ward that the incompetent ward would probably have provided for had they thought about making an estate plan before becoming incompetent.

Finally, one should keep in mind that everyone over the age of 18 should execute a durable power of attorney document. Incapacity can happen to anyone in an instant – whether from a medical condition such as a stroke or heart attack or from an accident such as a car crash.

A durable power of attorney is an essential estate planning tool since most people will usually become mentally incompetent or incapacitated in some manner before the actually die. There is nothing more frustrating to a family than not being able to act quickly to handle the everyday affairs of their loved one as she languishes waiting for her demise – a process that can only be days but is often a great deal longer.

The information contained in this article is intended to provide only general legal information and is not intended to be relied upon for specific legal issues or any particular legal matters. For specific legal issues or any particular legal matters, the reader is advised to consult with and secure the legal advice of an attorney of their choice.

The information contained in this article is intended to provide only general legal information and is not intended to be relied upon for specific legal issues or any particular legal matters. For specific legal issues or any particular legal matters, the reader is advised to consult with and secure the legal advice of an attorney of their choice.

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