Tag Archives: POA

Make Sure Your Power of Attorney Complies with Federal Privacy Law

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A power of attorney (POA) and a health care proxy are two of the most important estate planning documents you can have, but in some instances they may be useless if they don’t comply with the federal privacy law.

A POA allows someone you designate (your “agent” or “attorney-in-fact”) to make decisions for you if you become incapacitated. A health care proxy specifies who will make medical decisions for you. For these documents to be effective, your agents may need to be able to access your medical information. However, medical information is private. The Health Insurance Portability and Accountability Act (HIPAA) protects health care privacy and prevents disclosure of health care information to unauthorized people. HIPAA authorizes the release of medical information only to a patient’s “personal representative.”

HIPAA can be a problem especially if you have a “springing” power of attorney. A springing POA doesn’t go into effect until you become incapacitated. This means your agent doesn’t have any authority until you are declared incompetent, but, under HIPAA, the agent won’t be able to get the medical information necessary to determine incompetence until the agent has authority.

To make sure your agent doesn’t get caught in this “Catch-22,” your POA and health care proxy should contain a HIPAA clause that explains that the agent is also the personal representative for the purposes of health care disclosures under HIPAA. You should also sign separate HIPAA release forms that explain what medical information can be disclosed, who can make the disclosure, and to whom the disclosure can be made.

Contact your attorney to make sure your POA and health care proxy do not conflict with HIPAA.

Bank Pays Price for Refusing to Honor Request Made Under a Power of Attorney

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A durable power of attorney (POA) allows the person creating the POA, called the “principal,” to name a trusted agent who can act on his behalf in almost any situation. But because of the risk of abuse, many banks will scrutinize a POA carefully before allowing the agent to act on the principal’s behalf, and often a bank will refuse to honor a POA. Bank of America rebuffed a Florida agent’s request that funds be withdrawn from the principal’s account. The agent fought back in court and won a $64,000 judgment against the bank.

Clarence Smith, Sr., named his son, Clarence Smith, Jr., as his agent under a POA. When his father no longer wanted to manage his own finances, he asked Clarence Jr. to step in as his agent. Clarence Jr. reviewed his father’s account activity and became suspicious about some withdrawals from a bank account that Clarence Sr. owned jointly with a friend from his retirement community.

Acting as his father’s agent under the POA, Clarence Jr., asked Bank of America to transfer $65,000 from the account into a new account that listed only his father as the owner. Before doing so, Bank of America contacted the other person named on the account. When she told the bank that she did not want the funds withdrawn and also accused Clarence Jr. of stealing his father’s money, Bank of America refused to honor Clarence Jr.’s request. The other account owner then withdrew all of the funds from the account and placed them into her own account, effectively preventing Clarence Sr. from accessing his own money. Clarence Sr. died several weeks later.

Clarence Jr. sued Bank of America under a Florida law that imposes penalties on financial institutions that refuse to honor reasonable requests from agents named in properly executed POAs. A jury returned a verdict against the bank and awarded $64,142 to Clarence Sr.’s estate. The jury found that Bank of America had not acted reasonably when it rejected Clarence Jr.’s request, even though the joint owner of the bank account had not agreed to the release of the funds.

While this case clearly illustrates the conflicts that can arise through the use of a POA, it also raises the issue of the proper use of joint bank accounts in estate planning. Under most state laws, when two or more people own “joint” bank accounts, each of them has the right to the entire account, no matter whose money is actually in the account. While joint accounts can often be useful, sometimes, as in this case, joint owners or their agents can disagree about the use of funds in the accounts. When that happens, the party who makes it to the bank first often wins. Your attorney can explain the pros and cons of joint ownership, draft an effective POA, and assist family members when disputes arise.

8 Questions and Answers About Being an Agent Under a Power of Attorney

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You have just been appointed as an agent, or “attorney-in-fact,” under a durable power of attorney, a document that, for most people, is even more useful than a will. Your appointment allows you to act in place of the “principal” – the person executing the power of attorney — for financial purposes when and if that person ever becomes incapacitated. Here are answers to eight frequently asked questions about the agent’s duties, responsibilities and powers under the document.

1. What are my duties as agent?

You have been appointed to represent the principal with respect to his or her financial affairs. In effect, you can step into his or her shoes and take whatever investment and spending measures the principal would take himself or herself. Unless limitations have been placed in the power of attorney itself, you can open bank accounts, withdraw funds from bank accounts, trade stock, pay bills, cash checks. All steps you take must be consistent with your role as a “fiduciary.”

2. What does it mean to be a “fiduciary”?

This means that you will be held to the highest standards of good faith, fair dealing and undivided loyalty with respect to the principal. You must always act in his or her best interest and keep his or her goals and wishes in mind in making any discretionary decision. However, you do not have the same responsibility as a trustee or executor, who has total control over the estate or trust assets, since you share control with the principal himself or herself. Your duty only covers the level of care you take in your own actions as agent.

3. Can I be held liable for my actions as agent?

Yes, but only if you act with willful misconduct or gross negligence. If you do your best and keep the principal’s interests in mind as the basis of your actions, you will not incur any liability.

4. When does the power of attorney take effect?

Unless the power of attorney is “springing,” it takes effect as soon as it is signed by the principal. A “springing” power of attorney takes effect only when the event described in the instrument itself takes place. Typically, this is the incapacity of the principal as certified by one or more physicians. In most cases, even when the power of attorney is immediately effective, the principal does not intend for it to be used until he or she becomes incapacitated. You should discuss this with the principal so that you know and can carry out his or her wishes.

5. What if there is more than one agent?

Depending on the wording of the power of attorney, you may or may not have to act together on all transactions. In most cases, when there are multiple agents they are appointed “severally,” meaning that they can each act independently of one another. Nevertheless, it is important for them to communicate with one another to make certain that their actions are consistent.

6. Can I be fired?

Certainly. The principal may revoke the power of attorney at any time. All he or she needs to do is send you a letter to this effect. The appointment of a conservator or guardian does not immediately revoke the power of attorney. But the conservator or guardian, like the principal, has the power to revoke the power of attorney.

7. What kind of records should I keep?

It is very important that you keep good records of your actions under the power of attorney. That is the best way to be able to answer any questions anyone may raise. The most important rule to keep in mind is not to commingle the funds you are managing with your own money. Keep the accounts separate. The easiest way to keep records is to run all funds through a checking account. The checks will act as receipts and the checkbook register as a running account.

8. Can I be compensated for my work as agent?

Yes, if the principal has agreed to pay you. In general, the agent is entitled to “reasonable” compensation for his or her services. However, in most cases, the agent is a family member and does not expect to be paid. If you would like to be paid, it is best that you discuss this with the principal, agree on a reasonable rate of payment, and put that agreement in writing. That is the only way to avoid misunderstandings in the future.

How to Handle Sibling Disputes Over a Power of Attorney

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A power of attorney is one of the most important estate planning documents, but when one sibling is named in a power of attorney, there is the potential for disputes with other siblings. No matter which side you are on, it is important to know your rights and limitations.

A power of attorney allows someone to appoint another person — an “attorney-in-fact” or “agent” — to act in place of him or her — the “principal” — if the principal ever becomes incapacitated. There are two types of powers of attorney: financial and medical. Financial powers of attorney usually include the right to open bank accounts, withdraw funds from bank accounts, trade stock, pay bills, and cash checks. They could also include the right to give gifts. Medical powers of attorney allow the agent to make health care decisions. In all of these tasks, the agent is required to act in the best interests of the principal. The power of attorney document explains the specific duties of the agent.

When a parent names only one child to be the agent under a power of attorney, it can cause bad feelings and distrust. If you are dealing with a sibling who has been named agent under a power of attorney or if you have been named agent under a power of attorney over your siblings, the following are some things to keep in mind:

Right to information. Your parent doesn’t have to tell you whom he or she chose as the agent. In addition, the agent under the power of attorney isn’t required to provide information about the parent to other family members.

Access to the parent. An agent under a financial power of attorney should not have the right to bar a sibling from seeing their parent. A medical power of attorney may give the agent the right to prevent access to a parent if the agent believes the visit would be detrimental to the parent’s health.

Revoking a power of attorney. As long as the parent is competent, he or she can revoke a power of attorney at any time for any reason. The parent should put the revocation in writing and inform the old agent.

Removing an agent under power of attorney. Once a parent is no longer competent, he or she cannot revoke the power of attorney. If the agent is acting improperly, family members can file a petition in court challenging the agent. If the court finds the agent is not acting in the principal’s best interest, the court can revoke the power of attorney and appoint a guardian.

The power of attorney ends at death. If the principal under the power of attorney dies, the agent no longer has any power over the principal’s estate. The court will need to appoint an executor or personal representative to manage the decedent’s property.

If you are drafting a power of attorney document and want to avoid the potential for conflicts, there are some options. You can name co-agents in the document. You need to be careful how this is worded or it could cause more problems. The best way to name two co-agents is to let the agents act separately. Another option is to steer clear of family members and name a professional fiduciary.

Sibling disputes over how to provide care or where a parent will live can escalate into a guardianship battle that can cost the family thousands of dollars. Drafting a formal sibling agreement (also called a family care agreement) is a way to give guidance to the agent under the power of attorney and provide for consequences if the agreement isn’t followed. Even if you don’t draft a formal agreement, openly talking about the areas of potential disagreement can help. If necessary, a mediator can help families come to an agreement on care.

To determine the best way for your family to provide care, consult with your attorney.