Power of Attorney
Understanding how a Power of Attorney works is an essential tool in estate planning. Most people have a general understanding of how it works, but it can be tricky figuring out what kind of Power of Attorney works best. Hopefully, this article will clarify some of those issues.
A Power of Attorney (POA) is a written instrument authorizing a person (agent) to perform specific acts on the part of the individual (principal) who granted the power under S.C. Code Ann. § 62-5-501. These documents are considered “durable” when they contain language establishing the principal maintains the intent that the individual holding the power exercises the power when the principal is physically or mentally incapacitated.
POAs allow for decision making powers to be delegated to another person, and because of this, they must be reasonably definite in their terms to prevent mistaken belief about what the power granted allows the agent to do. Powers that can be granted by a POA include: the power to create a trust (irrevocable or revocable), power to disburse assets of principal, power to convey property, and power to designate beneficiaries.
In Watson v. Underwood, the grantor, Watson, gave a POA to her son to prevent her daughter and husband from inheriting any of her estate through her will, intestate succession, or elective share. 407 S.C. 443, 450, (App. Ct. 2014). In this case, Watson became incapacitated and the agent of the POA created an irrevocable trust for Watson, which was permissible even though the POA granted never specified how to distribute the assets to the trust. The court in Watson held that so long as the trust did not impede on Watson’s right to create a will or modify her current will, then the POA to create a trust was valid.
There are other variations of POAs, including Springing POAs and Health Care POAs.
Springing POA
Springing POAs differ from the durable POA in that a springing POA is triggered by a term stated in the document that the principal of the power has been deemed incapacitated. The springing POA document can also determine what incapacity is for the power to be effective, meaning that the agent seeking to use the power does not need to get a determination of incapacity by a court for the power to be used.
For example, a springing POA may define the principal’s incapacity as determined, “the agent’s authority is activated when the principal so provides or when the principal’s attending physician executes a written statement that the principal is not capable of making decisions in financial and personal matters.” When there is a provision similar to the one mentioned, there is no need for a court determination of incapacity for each exercise of the POA power. There may be a need to receive a court determination of incapacity each time the power is exercised without this provision in the POA document.
Health Care Power of Attorneys
Health Care POAs are governed under the South Carolina Health Care Power of Attorney Act and allows the agent power holder to make all health care decisions for the principal so long as the principal is unable to make their own health care decisions. This includes but is not limited to end-of-life-decisions and life-sustaining procedures. Health Care POAs interact with Living Wills in that it provides instructions for health care decisions in advance of the principal’s incapacity.
Living Wills
Living Wills allow people to provide health directives in their final phase of life. Individuals can decide if they want life-sustaining measures (feeding tube and hydration) once they have reached a point of incapacity. This is a decision many people make themselves so that their loved ones don’t have to.
All three of the mentioned powers: Durable Power of Attorney, Health Care Power of Attorney, and Living Wills are all designed to allow the principal to select an agent in the event the principal becomes incapacitated. In the event that no power is given to an agent and the principal is incapacitated, then the court has the obligation to designate an agent to act on behalf of the incapacitated principal. In these circumstances, the court will appoint a conservator to protect the assets of the incapacitated principal.
Conservatorships
A conservator is an agent appointed by the court to protect an incapacitated adult’s business and financial affairs when there are no living wills, health care POAs, or durable POAs. Conservators do not make health care decisions, but they can disburse assets of the incapacitated principal to pay off creditors to the principal. Conservators manage and protect the property, report periodically to the court about the assets, and relay receipts and disbursements of the estate. Conservators are unable to act without a written court order, which stipulates the duties the conservator must perform to serve the incapacitated principal. Conservators give the court a bond amount based on the value of the property held by the incapacitated person to ensure that the conservator’s duties to the principal are properly performed.
To have a conservator appointed for an adult, the incapacitated adult must live in the county sought or be an owner of land in the county where the appointment is being sought. A summons and petition (Form 540PC) must be completed and filed with the court. The filing fee associated with this form is typically $150.00. A Guardian ad Litem (GAL) is appointed by the court to represent the interest of the incapacitated adult. GALs differ from conservator because the GAL presents the current wishes of the incapacitated adult to the court, where the conservator prioritizes the best business and financial interest of the incapacitated adult to represent before the court.
In appointing a conservator, the court appoints at least one medical examiner to report to the court the physical and mental condition of the incapacitated adult. The medical examiner appointed will always be a physician. The conservator must file both a credit report and a criminal background check from the state where they are a resident.
The summons and petition must be served on all interested parties, the alleged incapacitated person, and GAL for the incapacitated adult. No service is required on the petitioner. Proof of Delivery (Form 120PC) must be filed with the court after service of notice to interested parties.
More than one family member has the legal priority to serve as the conservator of an incapacitated adult. Family members may renounce (Form 302PC) their right to serve and nominate the person who is best for the conservatorship. To contest an individual’s appointment as conservator, an interested party must retain an attorney for a hearing over the appointment. If an individual has no objections to the summons or petition, he or she can execute a waiver (Form 111PC). Twenty (20) day notice of the hearing must be served on all parties. The hearing will provide the petitioner with the opportunity to present evidence on why a conservator is necessary.
A surety bond must be submitted to the court pending the appointment of a conservator. The bond must be in the amount of the total value of the incapacitated adult’s personal assets (not real property) plus one year’s estimated income. A Restricted Account Agreement is an agreement whereby a federally insured financial institution certifies that no assets may be withdrawn without an order from the court.
Estate planning and health care directives are important to making sure your loved ones are protected when you pass. They also free loved ones from the stress that derives from attempting to fulfill your wishes with your assets left behind. Be sure to consider these options when determining the best estate plan for you and your loved ones. Henderson & Henderson understands the burdens that could fall on your family members in the event of your passing, and we work to eliminate questions that can arise from the disbursement of your property.
