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"How to get Medi-Cal coverage for your nursing home care... without selling your home or leaving your family without a dime... Surprising ways to pay for your assisted living and long term care costs."

Elder Law Today Newsletter | Vol. 14 | December, 2006


Use of the Financial Durable Power of Attorney in Estate Planning

One of the most important legal documents comprising an estate plan is the Financial Durable Power of Attorney.(Financial DPA) This document, which can be signed by anyone age 18 or older, (the Principal) allows another person (the Agent) to handle all of the Principal’s financial decisions if the Principal is ever unable to make them for himself.

Depending on the circumstances and the requirements of the client, specific language is chosen for the Financial DPA. This language can include, for instance, powers for the Agent to fund the revocable living trust with assets that have not been transferred to the trust, and for making amendments to the trust. It can also provide for limited gifting to family members if needed for Medi-Cal planning or for inheritance tax purposes. It can also provide for the creation of other trusts, if needed.

Without the Financial DPA, a spouse or adult child cannot automatically step in to take care of financial decisions if an accident or debilitating illness leaves their loved one without capacity. The alternative course of action would be to petition the probate court through a conservatorship proceeding for the right to act on behalf of a loved one, and then provide the courts with annual accountings of how funds were handled.

The importance of the Financial DPA should not be taken lightly. The Principal granting this power gives the Agent broad and sweeping power to handle the Principal’s financial affairs. So, it is extremely important that the Principal implicitly trust their Agent.

Depending on the way the document is drafted, the powers can be used as soon as the document is signed. In the alterntive, the powers can be withheld until after the Principal becomes incapacitated.

The laws in California allow for what is known as a “springing” Power of Attorney. In this case, the document does not grant the Agent any authority until one (or two) doctors, or a “disability panel” declare the Principal incompetent to make decisions for himself. While this does have some advantages in certain situations, there are pitfalls.

An individual who is bedridden, confined to a nursing home or even away on a long vacation quickly realizes the advantages of having someone with the legal authority to handle their financial matters, make trips to the bank or oversee and authorize home repairs.

Anyone who takes on the role of Agent for a loved one has a “fiduciary duty” to exercise prudence and caution when dealing with the Principal’s assets. The Agent must act in the Principal’s best interests at all times. The power of the Agent ends upon the death of the Principal.

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