section 1 - The American College Online Learning Center

(6) Powers to represent their principal with government agencies(7) Powers to hire a caregiver and negotiate caregiver contracts8. Issues with a power of attorneya. Capacity is necessary for a power of attorney to be effective.(1) The client must be competent to sign a power of attorney.(2) Planners should document an individual’s competency when document issigned.b. Limitations of power of attorney include:(1) Third parties may not honor the agreement.(a) The attorney can draft instructions into the power of attorneydocument that will make it easier for the financial institution tocomply.(b) The best assurance for compliance is to have the agent use thepower of attorney with the principal’s financial institutions as soonas possible to determine if any problems will arise.(2) A power of attorney is revocable as long as the principal has capacity. It isimportant to periodically review the power of attorney and execute a newdocument if circumstances change.9. Solutions to the “living probate” problema. Durable power of attorney alone is sometimes not sufficient(1) Actions of the agent will be construed strictly and narrowly(2) Financial institutions may be reluctant to deal with the agentb. Laws with respect to living revocable trusts are more flexible and well developed.c. A trust is a private contract and trustee can be given full asset management anddisposition power while the grantor is alive.d. A trustee is governed by fiduciary responsibility. The trustee must act solely inthe best interest of all beneficiaries of the trust. The trustee must follow thedirections of the trust.10. Living revocable trust with a durable power of attorneya. The trust is a much more flexible vehicle with respect to investing assets andmaking distributions as necessary.b. The trustee can also be given the power to distribute to other family members ofthe grantor under the beneficial terms of the trust.c. The trustee can only manage assets which have been titled in the name of thetrustee or have been made payable to the trustee.d. The agent under the durable power of attorney can serve the function to fund thetrust or withdraw assets from the trust as necessary.e. If circumstances change, the agent under the power of attorney can beempowered to change the terms of the trust or revoke the trust if necessary.f. Both the trust and the durable power of attorney can be relatively inexpensivearrangements to set up and administer.g. Preferable to guardianship unless there are no trusted family members orfriends, or if the client is totally uncomfortable with delegating authority, it may benecessary to rely on a formal guardianship if the client loses capacity.11. Structure for the living revocable trust4.39