Why You Need a Durable Power of Attorney Now!

Planning for unfortunate events such as serious illness or injury is rarely on anyone’s list of favorite pastimes. Sometimes, though, enduring the small discomfort that may accompany preparing for the unexpected will avoid untold anguish on the part of your family and friends. This is certainly the case with the Durable Power of Attorney, an often simple document that becomes so very important if sickness or injury renders you unable to take care of your own affairs.

Power of Attorney Defined

A Power of Attorney is a document in which you (as the “Principal”) allow someone else (the “Agent” or “Attorney-in-fact”) to act legally on your behalf. The Power of Attorney may be limited to very specific actions that the Agent is authorized to take on your behalf. On the other hand it may give the Agent very broad powers. In either event, the Agent you appoint in the Power of Attorney should be someone that you trust without reservation. That could be a family member, an advisor, a trustworthy friend or a bank or similar institution.

The “Durable” Power of Attorney

The significance of having a “Durable” Power of Attorney is best understood if you know what can happen with the plain old garden variety of Power of Attorney.

If you sign a Power of Attorney that is not “durable,” the document remains effective only while you are alive and competent to handle your own affairs. If you become incompetent or die, the Power of Attorney is automatically revoked by law and your Agent is no longer able to act on your behalf. This prevents a Power of Attorney from becoming irrevocable inadvertently, and, until recent times, it was the only way a Power of Attorney could be prepared.

The non-durable Power of Attorney has limited usefulness for family and estate planning purposes, though, because the Power of Attorney is often most needed when you have become incapacitated! That is when you really need someone else that is able to make legal decisions or take other actions on your behalf.

All fifty states now permit the use of a “durable” Power of Attorney that is not revoked simply because the Principal becomes incapacitated or mentally incompetent. This makes the Durable Power of Attorney a far more reliable document, particularly for family and estate planning purposes, since you may now authorize your Agent to act on your behalf even after illness, injury or other cause has rendered you unable to manage your own affairs. Even with a Durable Power of Attorney, however, the Principal’s death causes an immediate revocation of the document and termination of the powers that are given to the Agent.

A Matter of Convenience

The Durable Power of Attorney is often used as a matter of convenience.

Suppose, for example, you have your home listed for sale. You have also planned a long awaited trip to visit Aunt Trixie in Deadwood, South Dakota, and you are concerned that an interested buyer may come along while you are on the road. A Durable Power of Attorney would be handy here to appoint someone you trust to act in your absence to negotiate the sale and sign any documents that are needed to make the deal binding.

The Durable Power of Attorney could be prepared so that it is effective only until the date you plan to return from your trip, and it might describe specific terms that your Agent must include in the sale, such as the minimum sale price that is acceptable to you.

A Matter of Protecting Loved Ones

What happens if, from illness, injury or another cause, you become physically or mentally incapacitated to the point that you are no longer able to handle your own legal affairs?

Let’s suppose again that while you are incapacitated it becomes necessary to mortgage your home to pay your medical bills. Who will sign the mortgage? Even if your home is jointly owned with your spouse, he cannot obtain a mortgage without your signature.

In those circumstances it would be necessary to request the local probate court to appoint a guardian for you that has the power to handle your legal affairs. In many states, this type of guardian is referred to as a “conservator”. Included in the conservator’s powers might be the power to borrow money and sign a mortgage on your behalf making it possible to obtain the funds needed to pay the medical bills.

However, you may have heard that it is advantageous to avoid probate whenever possible, particularly if there is a good alternative available. The delay and expense associated with probate proceedings and the fact that they are conducted in the probate court, a public forum, make that good advice in most circumstances. And there is a better alternative than probate, but it requires you to act before the incapacity arises – you need to sign a Durable Power of Attorney.

When used in this estate planning context, the Durable Power of Attorney is generally worded very broadly to give your Agent the power to step into your legal shoes in almost any circumstance. In effect, you tell your Agent “You can do anything I can do.”

Now, if you have prepared the Durable Power of Attorney and then become incapacitated, no one has to go through a probate proceeding to appoint a guardian or conservator to act for you – you have already given your Agent the power to do so. As you can see, the Durable Power of Attorney can save precious time and expense in critical situations and avoid having your personal affairs become the subject of a public proceeding.

Appointing a Successor Agent

It is often a good idea to appoint one or more successor Agents. The Agent you appoint in your Durable Power of Attorney may die or for some other reason become unable or unwilling to act as your Agent. In that case, you may be left without someone to act for you when you most need that assistance.

Appointing successors to your first choice of Agent helps insure that someone is always available to handle your affairs. Of course, each successor that you appoint should be someone that has your complete trust.

Revoking a Power of Attorney

As long as you are competent, you have the power to revoke your Durable Power of Attorney. To do so, send written notice to your Agent notifying him or her that the document has been revoked. Once the Agent has notice of your revocation, the Agent may take no further action under the Durable Power of Attorney. However, your revocation will not undo any permissible actions that the Agent has taken prior to being notified that the Power of Attorney has been terminated.

You must also notify third parties with whom your Agent has been dealing that the Durable Power of Attorney has been revoked. For example, if the Agent has been dealing with a stockbroker, you must notify the stockbroker as soon as possible. Do this in writing, as well, and do it immediately. Third parties who do not receive notice of the revocation are entitled to, and probably will, continue to rely on the Durable Power of Attorney.

Making the Durable Power of Attorney Effective upon Incapacity.

It is possible to have a Durable Power of Attorney that only becomes effective if and when you become incapacitated. This document is referred as a “springing” Durable Power of Attorney because it “springs to life” on the occurrence of a future event – your incapacity. The document should include a detailed definition of “disability” to make clear the circumstances in which your Agent may act on your behalf.

Knowing that your Agent is unable to exercise his or her powers until you are actually unable to do so yourself may make using the Durable Power of Attorney more comfortable for you. Unfortunately, even with a good definition of incapacity in the springing Durable Power of Attorney, your Agent may find that third parties are simply not willing to make the judgment that you are indeed disabled. If they are wrong, they may be held liable to you for any damages that you sustain as a result of the error in judgment. You may therefore find the springing document cannot be relied upon in all circumstances.

Don’t Procrastinate!

Estate planning is easy to put off. But don’t! Advance planning, such as executing a Durable Power of Attorney, may make a horrible circumstance for you and your family just a bit more bearable.

Should You Create a Power of Attorney?

There are some few exceptions as the right to get married or vote. As an individual and principal you can grant unlimited power known as a general power of attorney.

The attorney-in-fact generally can only carry out an action if the individual and principal can exercise the same power. This stops the attorney-in-fact from acting when the principal is incapacitated. If an individual is unable to sign a contract the attorney-in-fact is also unable to sign a contract for the principal. But if you have a Durable Power of Attorney the attorney-in-fact is allowed to execute the powers granted by the principal even after the principal becomes ill.

At the Time of Death A Power of Attorney Ends

Whether you have a Durable Power of Attorney or you do not, at the time of death all power of attorney ends. If the individual and principal has granted attorney-in-fact rights to perform certain tasks, upon death all those rights are terminated.

How A Power of Attorney is Revoked

As long as you are alive you have the power to revoke the power of attorney. To revoke the power of attorney you must contact your attorney-in-fact that the power of attorney has been revoked. You can also detail at what date the power of attorney will expire.

A Springing Power of Attorney

A power of attorney can be designed to spring into effect if you become disabled or at some predetermined time or event. This is a springing power of attorney. The springing power of attorney prevents your attorney-in-fact from using the powers while you are able to take care of them yourself.

The attorney-in-fact must prove that the individual where your powers are concerned is in fact disabled and can not perform the tasks needed. You will need a written document from the physician or hospital that you are incapacitated.

It should be a current document and not several days old or it could be questioned as to whether you are still ill or disabled. So to save yourself, added turmoil, and be required to furnish a more current document take care of it the same day.

Instant Power of Attorney

Your powers of attorney can become effective immediately, as soon as it is signed, This is the type of power of attorney people use when they will be in another country for a long period of time and will not be available to handle such matters. It is generally a durable power of attorney that will expire in one year. You can also have provisions built into the powers of attorney will you can extent it. If you become incompetent or ill when the power of attorney expires, and you’re attorney-in-fact or agent, will need to go before the court to get approval to continue.

Medical Decisions

When you have a durable power of attorney it can be used to allow your attorney-in-fact the power to make medical decisions in case you become incapacitated. Most individuals have separate power of attorneys for medical and financial affairs. Sometimes the same person handles both powers of attorneys.

How to Choose your Attorney- In-Fact

Since this is one of the most important documents of your life it goes without saying it should be the most trusted of people with impeccably credentials who understand your wishes And how to handle your business. One other thing to bear in mind is when you give someone this power they have the ability to do as they wish, and may not follow your instructions. That’s why you must be very careful. When it comes to money sometimes people do things for their own interest. Your attorney-in-fact is a fiduciary. Which means that they are there to manage your assets to help you, and not themselves. The person you choose will be called under difficult circumstances. So generally it will be a family member or a close friend and sometimes an attorney you trust and respect. If you do not have a power of attorney in place it will fall to the laws of the state.

Does Having an Attorney Determine Whether You Win or Lose Your Social Security Disability Case?

Did you know you can increase your odds of winning your Social Security (SSA) Disability case by more than 50% if you are represented by an attorney? Simply put, that’s a dramatic difference and one that every Social Security disability applicant should heed.

Congressional and SSA’s own statistics confirm this statement is true. The statistic came to light in November 2001, during Congressional testimony provided by Congressman Robert T. Matsui of California. During the hearing Congressman Matsui provided the following testimony:

“Professional representation is a valuable-and indeed vital-service. The disability determination process is complex. Claimants without professional representation appear to be far less likely to receive the benefits to which they are entitled. For example, in 2000, 64% of claimants represented by an attorney, but only 40% of those without one, were awarded benefits at the hearing level.”[1]

At the same hearing, Congressman E. Clay Shaw, Jr. of Florida provided the following testimony:

“As many of you know, filing for Social Security benefits-especially disability benefits-is so complicated that many claimants must hire attorneys to guide them through the process.” [2]

Please understand I am not suggesting that you must have an attorney in order to win your disability case. People can and do win their cases on their own. In fact, SSA does not require you to have an attorney, you can represent yourself; but why on earth would you? Congressional and SSA’s own statistics show dramatic differences in the outcomes of cases depending on whether an attorney is involved.

I have debated for years on whether to write an article on why one should hire a disability attorney. I did not want the article to be viewed as self-serving for either myself or my profession. I am aware of the unfortunate stature attorneys hold in our society, some of which is deserved. I always enjoy the look in a person’s eyes when they learn I am an attorney; it is clear they are searching their mind to share the latest attorney joke…and most are very funny!

However, the testimony of Congressmen Matsui and Shaw confirms what SSA and many disability attorneys have known for years. With such a compelling statistic, it is my hope this article is viewed as educational, rather than self-serving.

So you know the difference a disability attorney can make in your case…what can do you do about it? For those of you who are now considering hiring an attorney, let me provide you with some basic information to assist you in your decision.

1. You only pay an Attorney’s fee if you win your Case!

The number one question on people’s minds is, “How can I afford an attorney when I am not working?” The answer is simple…you only pay the attorney a fee if you win your case. You do not pay an attorney upfront. Generally, every disability attorney will represent you on a contingency fee basis. Simply put, this means you do not pay an attorney’s fee unless you win your case. Thus, everyone seeking disability benefits can afford an attorney. The question you should be asking yourself is “can I afford not to be represented by an attorney?”

2. General information regarding the attorney’s fees

The SSA and federal law set the attorney’s fees in disability cases. The standard fee agreement most attorneys use states the attorney’s fee is contingent upon winning your case. The fee is 25% of all past due benefits for you and your family, up to a maximum of $5,300, or whichever is less. Some attorneys may use a fee agreement which provides for a maximum fee of $7,000.

It is worth noting that on February 1, 2002, SSA increased the maximum standard fee amount to $5,300 from $4,000. This is the first time the fee has been increased since 1990 and simply represented a cost of living adjustment.

Thus, the attorney’s fees are usually only a fraction of the benefits you receive; depending on the amount of your past due benefits, it can be a very small fraction.

3. What is my case worth if I win?

The answer to this question depends on a number of factors including…how long you have been disabled, when or if you will ever return to work, the amount of your monthly benefit and whether you have eligible dependents.

For example, if you are 45 years old, your monthly benefit amount is $1,000, and you do not return to work before age 65; your case can easily be worth $250,000! This amount does not include the value of the Medicare or Medicaid insurance you will be eligible for after being found disabled. As many of you know, the price of medical insurance in middle age, with pre-existing medical conditions, can be staggering and not affordable. This of course assumes that an insurance company is willing to insure you.

4. Why you increase your odds of winning your case if you hire a Disability Attorney

There are many reasons hiring an attorney can significantly increase the odds of winning your case. One significant reason is that disability attorneys understand the complicated laws and regulations that determine success or failure. Two questions I always ask potential clients are, “Do you know what you need to prove in order to win your case?” and “If you do not know, how are you going to go about proving it?

You should hire an attorney who specializes in Social Security disability law. Furthermore, I believe it is important to hire an attorney who has expertise in representing people with your type of diagnosis. It is important that your attorney believes in your case and that they can win it. I suggest you ask the attorney how much experience they have with your type of diagnosis and how often do they win? Any disability attorney should be willing to provide you with this information.

5. What an Attorney should do to increase the odds of winning your case

From the beginning, the attorney should set forth a strategy that you both of you should follow to win your case. It is critical to understand what is necessary to prove your case and how you will go about winning it. The sooner you know this, the sooner you can take steps to execute the strategy and thereby increase your odds of winning. Thus, you should consult with and hire an attorney either when you file your claim or as soon thereafter as possible.

Based on my experience in representing clients nationwide (remember Social Security is federal law and not state specific); literally none of them had a strategy or plan on how to win their case before they hired me. This is important because most of them were simply “doing whatever SSA told them to do” while their claim was being processed. This included seeing SSA’s doctors for an examination that often results in a denial of their claim.

It is important to understand that SSA is only obligated to investigate your case and is not charged with approving it. I am not suggesting that SSA denies every claim; I’m simply stating that my experience after having successfully represented many clients whose claims were previously denied by SSA because evidence was not obtained, not reviewed or SSA focused on what it wanted to in order to support a denial.

In conclusion, if you are contemplating filing a claim for SSA Disability benefits, I encourage you to consult with an attorney as soon as possible to help you understand the process. The consultation should not cost you anything except your time. By understanding the process and having a strategy, you will significantly increase your odds of winning your case.

Congressional and Social Security’s statistics do not lie – it is penny wise and pound foolish not to hire a disability attorney.

[1] November 16, 2001 CONGRESSIONAL RECORD, Testimony of Honorable Robert T. Matsui of California, regarding the Attorney Fee Payment System Improvement Act 2001.

[2] November 16, 2001 CONGRESSIONAL RECORD, Testimony of Honorable E. Clay Shaw of Florida, regarding the Attorney Fee Payment System Improvement Act 2001.