Understanding the Legal Documents

Without the specific legal knowledge of the appropriate documents to ensure a smooth financial process, it can be difficult to know where to begin.

Here are some of the legal documents used by financial caregivers to manage or direct finances of a care receiver.

Power of Attornery (POA) for Property

A standard form POA for Property provides that the “Agent” (caregiver) must handle the assets of the “Principal” (care receiver) with their best interests first and foremost. The Agent must use care and prudence in administering the financial affairs of the Principal. The Agent can be held civilly liable for negligence in failing to do so.

Some of the routine duties expected of the Agent are:

  • Paying bills
  • Making investment decisions
  • Preserving the value of property
  • Preparing tax returns
  • Selling Real Estate

An example of negligence: An Agent decides to sell stock to pay bills instead of using other liquid assets such as a money market. The cost basis of the stock is subsequently discovered to be very low, triggering a significant income tax liability for the principal that perhaps could have been avoided or delayed.

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Power of Attorney (POA) for Healthcare

While not specifically able to direct the assets under the control of another person, the POA for Healthcare gives the Agent the power to make healthcare decisions on behalf of a Principal. Some of those decisions include housing and lifestyle choices. Those with the financial obligation to provide financial support for the care recipient must pay for the care as directed by the Healthcare Agent. These financial obligations must be paid from assets of the person receiving the care so there is a financial component to this care giving role. Disagreements may arise between those with financial power and those with healthcare power if they are not the same person.

Some routine decisions of the POA for Healthcare are:

  • Treatment/Therapies
  • Residence Placement
  • Surgical Procedures
  • Resuscitation
  • Transportation
  • Lifestyle Enhancements

An example of POA for Healthcare power: An Agent directs that the Principal move from one rehabilitation facility to another if the Agent decides the care is insufficient – regardless of the opinion of others, even immediate family members.

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Trustee Appointment

A Trustee has responsibility only for those assets titled to a trust. A trust document will have specific language as to the responsibilities of the trustee. Typically the trustee must provide financial support to the “Grantor” (care receiver) to the exclusion of others but not always. Trustees have a fiduciary obligation to preserve and protect trust property not only for the current beneficiaries but also for those future benefi ciaries named in the trust document. There can be significant liability if the Trustee fails to carry out all of their duties.

Some of the duties performed by a Trustee are:

  • Care and management of all trust property
  • Payments to the beneficiary in accordance with the trust document
  • Accounting for all transactions to future benefi ciaries
  • Preparing the trust tax return
  • Coordinating payments of caregivers for the beneficiary

An example of Trustee negligence: A Trustee who fails to maintain a home can be held personally liable to the beneficiaries for the loss of market value of the home due to neglect. 

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Guardian of the Estate

Without a valid and effective POA for Property, a court with jurisdiction may appoint a Guardian of the Estate to determine who may assist the “Ward” with his/her finances. There may also be a Guardian of the Person to make healthcare decisions but they do not necessarily have to be the same person. Because a guardianship is supervised by a court, all financial decisions must be approved by the Court. There is little discretion on the part of the Guardian of the Estate.

Some of the regular responsibilities of the Guardian of the Estate are:

  • Account for all financial and investment transactions to the Court via periodic reports and hearings
  • Make payments as approved by the Court
  • Prepare all Court reports
  • Invest according to statutory guidelines
  • Coordinate with the other caregivers for the care of the person

An example of Guardian negligence: A Guardian that uses the Ward’s funds for items not approved by the Court can be ordered by the Court to repay the guardianship account with his/her own funds. 

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