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As an elder law attorney, I am often asked the questions: “Once I execute my power of attorney may I change it in the future? How can I terminate my Power of Attorney?”
Every adult individual over the age of 18 should have a financial power of attorney (“POA”) in place. A POA allows you, the “principal”, to give someone else, “your agent”, the authority to manage your financial and business affairs. The Agent does not get an ownership interest in your property, but instead a fiduciary duty is imposed on the agent to act in the best interest of the principal. If your Agent fails to act in the principal’s best interest, the principal has the right to revoke the power of attorney and remove the agent from authority. A POA is very flexible in regards to what authority is given, for what time period it is effective, and who gets the authority. The principal decides exactly what powers are granted to the agent and how they will be exercised. How exactly does the principal terminate a POA? There are actually multiple ways you can terminate the authority granted under a power of attorney: 1) Death, 2) Specify in the document when the POA expires, 3) Execute a new POA, 4) Court Order, 5) Destruction of the Original. Once the principal passes away the powers granted to the agent under the POA expire and the Will becomes effective. Second, the POA itself can say when the authority ends. If you are leaving the country but need your son to manage your property, hire a landscaper, and pay utilities and taxes, your POA can state: “The enumerated powers are in effect from June 1, 2016 to August 31, 2016.” Third, when the principal executes a new POA, typically the first statement of the POA revokes the authority of the previous document. Fourth, you can petition the court to remove an agent if the principal loses capacity and it can be proven with clear and convincing evidence that the principal is not acting in the principal’s best interest. Fifth, the principal can destroy the original POA. Once a POA is revoked the principal or new agent should contact all his or her financial institutions to notify them the previous POA has been revoked and a new agent has been appointed. The principal should also notify the former agent in writing so that it is clear he or she is no longer authorized to act on behalf of the principal. An agent who acts in good faith and without knowledge of termination is shielded from liability and any 3rd party who relies on such authority will be protected. Deciding who will be your agent is a very important decision. Your agent should be someone who you trust implicitly with your affairs and who is capable of making sound financial and business decisions. If you need guidance on making this decision, I recommend you speak to an experienced attorney to help you with the process. On December 19, 2014, President Obama signed into law “The Achieving a Better Life Experience (ABLE) Act,” which allows for qualified individuals to have a tax-free savings account to help meet their disability needs. On January 11, 2016, Governor Christie signed bills that allowed for qualified individuals to establish ABLE accounts in New Jersey. Unfortunately, it takes the government time to implement such a program so it is looking like these accounts will not be available in New Jersey until the end of 2016.
I believe that ABLE accounts will become a common planning tool for families with special needs individuals because they allow a family to set up a special savings account for disability-related expenses, without the additional administration and costs of setting up a special needs trust. This will allow more families access to a savings vehicle to promote the independence of the disabled individual, while maintaining eligibility for Supplemental Security Income (SSI) or Medicaid. The ABLE account is the offspring of a 529 Account, which allows a tax free savings vehicle for allowable education expenses. In fact, an Able account is also known as a 529-ABLE Account. Contributions are made with after-tax dollars up to a maximum of $14,000 per year from all sources, but the growth is tax-free. Similar to a standard 529 Account, withdrawals must be for qualified expenses otherwise the gains would be subject to income tax and penalties. An ABLE account may be used for education, housing, transportation, employment training, personal support, health, financial management, legal fees, burial expenses, among others. In order to qualify for an ABLE account, an individual must have been diagnosed with a disability before the age of 26 AND receiving SSI or SSDI under Title II of the Social Security Act OR has a physical or mental impairment which can be expected to result in death or which has lasted or expected to last for a continuous period of not less than 12 months or is blind AND provides documentation of the diagnosis signed by a physician. Only one ABLE account can be established for a qualified beneficiary. An individual’s ABLE Account can have up to $100,000 that does not count toward the SSI or Medicaid Resource Limit of $2,000. If the account exceeds $100,000, the individual would no longer be eligible for SSI; however, he or she would not lose Medicaid coverage. ABLE accounts will be a useful planning tool in conjunction with Special Needs and Supplemental Needs Trusts; however, they will not negate the need for estate planning specifically tailored for special needs individuals. I highly recommend anyone who may have a family member with special needs to speak with an experienced special needs attorney to find out if establishing an ABLE account makes sense for their individual situation. |
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