Powers of Attorney and Other Representative Documents
by Carolyn Walder
As many of our clients know, we have been harping on the importance of estate planning and the need for more than just a Will. However, did you know that a properly prepared and executed estate plan may not be enough? Consider your Power of Attorney: even though you (the Principal) may have a Power of Attorney (POA) drafted to enable another person (your attorney-in-fact or AIF) to take care of your financial affairs when you are unable to, certain government agencies and financial institutions insist on more to enable the AIF to execute his or her duties! This blog discusses those situations and gives you the tools to enable you to be completely prepared!
A Quick Review
As you are probably aware, a POA is one of the important documents that every individual should have prepared, particularly in light of our aging population that all too soon will be unable or less able to take care of their financial affairs. There are several types of POAs, those that are in effect from the time you sign the document (a durable POA) and those that do not take effect until some point in the future (a springing POA). The springing POA is generally used by folks who only want their AIF to be able to act on their behalf once they are no longer able to make their own decisions. A springing POA adds an extra layer of complexity for the named attorney in fact as the AIF must first get the person (the Principal) declared incompetent before he or she can act, which is time consuming and may even involve going to court. This blog focuses on the durable POA, highlighting those issues for serving as an attorney in fact for a loved one.
As we have discussed for some time now, even though a durable POA is a very important document, it may not be enough to enable the AIF to carry out his or her duties under the POA. In particular, banks and other financial institutions often require that you complete their paperwork or POA before allowing the AIF access to the accounts. This may seem like an unreasonable obstacle, but it is rooted in the fact that the bank has legal liability over the accounts for any wrongdoing that may ensue if it turns out to be illegitimate. Some states (including Maryland and Virginia) require that a bank accept a power of attorney under certain circumstances. In states that do not have such a requirement, a bank may decline to honor a power of attorney at its discretion. In Virginia, a bank must accept a notarized power of attorney unless a statutory exception applies. However, a bank is not required to accept a power of attorney if it believes in good faith that the agent does not have the authority specified in the document or that the agent has been relieved of his or her authority. Regardless, financial institutions are obligated to ensure the validity of the POA and may even wish to consult with the attorney who prepared it. Furthermore, the financial institution may also request that the AIF complete an affidavit (a sworn written statement) stating they are acting legally, which will relieve them of any liability. Lastly, some institutions may insist that their own forms are completed and will not recognize the POA under any circumstances. It is best to contact the bank in advance to determine whether you can use your own power of attorney or you'll be required to use a form furnished by the bank.
If you look at it from the bank’s perspective, you can understand their wariness. It is well known that older adults, especially those with cognitive impairment, are vulnerable to financial exploitation, and too often the guilty parties are family members. To avoid any future problems, make sure that you get this addressed before the person has any symptoms of incapacity. In fact, it is a good practice that this be completed at the time one is named as the AIF. Even though you may have secured your POA validity with the financial institutions, that is generally not enough. If you are the AIF for a Social Security or Veterans Administration beneficiary, you will need to obtain further authorizations.
Social Security Benefits
The Social Security Administration (SSA) does not recognize a POA, instead the SSA requires the person to become an Authorized Representative or Representative Payee, depending on the type of assistance you are providing. If you are trying to help a loved one with Social Security applications, claims, or appeals, you will need to apply to be their Authorized Representative by completing the SSA Appointment of Representative Form. The representative must be a qualified person such as a relative, friend, attorney, or other legitimate person, and the SSA will thoroughly vet this person before accepting his or her appointment. If you are trying to help a Social Security beneficiary manage his or her retirement benefits and/or Supplemental Security Income (SSI) benefits, you must apply to become their Representative Payee. The SSA requires all beneficiaries who are incapable of managing their own payments to have a Representative Payee. Even though you have been named as an AIF, acting as the Representative Payee for an SSA recipient entails a great deal of accountability and meticulous recordkeeping of the beneficiary’s benefits and how they are spent. If this is not something that you believe you can take on, there are qualified organizations that can be appointed by the SSA to manage the beneficiary’s benefits. If you are planning to apply to be the Authorized Representative or Representative Payee, it is recommended that after reviewing A Guide for Representative Payees, you speak to a live person, either by phone or in person at the Social Security office, to get answers to questions and make sure you are using the right forms and terminology.
Retired Federal Employee Benefits
Like the SSA, the Office of Personnel Management (OPM) will not accept a POA and has its own form that must be completed to enable one to be a Representative Payee for a federal annuitant (both FERS and CSRS). Note: OPM will not make payment into a joint account unless the party holding joint tenancy with the annuitant has been designated the Representative Payee! This means that even spouses are expected to complete this form and be appointed to act for the annuitant.
If the loved one who you are helping also has earned Veterans Administration (VA) benefits, then you need to complete more forms to allow the veteran. A POA for finances is not sufficient authorization for managing a veteran’s benefits. If a physician or a court of law has determined a veteran to be incapable of managing his or her finances, the VA will call for the appointment of a fiduciary. The veteran typically appoints whom he or she wishes to serve in this capacity (usually in their POA document), then the VA conducts a thorough investigation of the individual’s eligibility. In cases where there are no suitable family members or friends available to serve as a fiduciary, the VA will appoint a qualified individual or organization to serve in this role. More information can be found on the VA website.
Medicare and Insurance Companies
If you are charged with helping someone with his or her Medicare or private insurance benefits, the easiest and simplest way to get answers to questions is to call Medicare or the insurance company. The beneficiary will need to be present and on the phone call with you (or in a three-way call) and be able to answer simple questions to establish his or her identity before giving you authority to receive the beneficiary’s personal health information. If such a phone call is not possible, then you will need to complete a Medicare Authorization Form as Medicare cannot provide personal health information to caregivers unless the care recipient has submitted written authorization or provides verbal permission. This form can be completed online, over the phone with the assistance of a customer service representative, or by completing a printed copy and mailing it to the appropriate address. Electronic submission allows for quick and easy processing, which means you’ll be able to speak to a representative much sooner. Mailing in a paper form may involve a few weeks’ delay before you are authorized to act on the beneficiary’s behalf. If you need to help a Medicare beneficiary file an appeal or complaint or request a coverage determination, you will need to be officially appointed as the beneficiary’s representative. This requires yet another document to be completed, the Appointment of Representative form. Private insurance companies often have their own versions of these forms, so be sure to check with the beneficiary’s insurer regarding specific authorization requirements.
Short on Time?
So what can you do if this information is coming to you too late and you have already found yourself in a bind? One generally effective—although expensive—avenue can be to engage the assistance of an attorney. An attorney can elevate the situation to the “higher ups” and reason or simply badger the bank or other financial institution to accept your valid POA. However, now is the time to get these documents to avoid future pain and wasted time on these issues!
As always, Lifetime Wealth would be happy to speak to you about your Powers of Attorney and other estate planning documents.