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March 2, 2006
SENIOR CHECKUP
I’m back from Washington DC after a harrowing 9 hour drive home, towing my 1956 Austin Healey back to it’s spot in the garage. I was thinking that after hearing about all of this years bad news and more cuts to Medicare and Medicaid planned for next year, maybe we should take a look at what you can do to be prepared for the future. Before we start, take a look at my tax tip of the week.
TAX TIP – This is tax season and I am finding that most people don’t know about the new Massachusetts deductions and credits for heat and energy conservation. Before you finish your taxes make sure you add up how much you spent on heating your home for November and December 2005. This amount, up to $800, will be allowed as a deduction on this years taxes. Also, if during November or December, you changed to more energy efficient windows or doors, added insulation or any other item to make your house more energy efficient, you are entitled to a tax credit. And the only thing better than a deduction is a credit which is equal to dollar for dollar in reducing your taxes.
What are the two most important documents that an elder should have? I think they are the health care proxy and durable power of attorney. These are two separate documents that allow an agent to make decisions, if you are unable to. The health care proxy deals with health care decisions while the durable power of attorney deals with financial decisions.
Health Care Proxies are documents that allow you to name another to make your medical decisions for you if you are unable to do so yourself. There is something else called a Living Will. A Living Will is a statement of what your medical wishes are in the event you become ill.
In 1990, Massachusetts established its preference for the Health Care Proxy over the Living Will when it codified the Health Care Proxy Law. There is no comparable law in Massachusetts for the Living Will so we always recommend a Health Care Proxy and never prepare a Living Will. Even though Massachusetts does not require notarization of the signatures, we notarize our health care proxies in case they are used in another state that might require it.
DURABLE POWER OF ATTORNEY (DPOA) - If you own real estate, life insurance, stocks, bonds, bank accounts or any other type of asset, a durable power of attorney is greatly recommended. By having a power of attorney these assets could be transferred or otherwise dealt with even ff you ever became incapacitated. This would avoid the need for a guardianship and court approval to make any transfers. The agent under a DPOA is given certain powers to handle your financial affairs. Generally, these are needed when a person can no longer handle their financial affairs. If someone becomes incapacitated the agent would have the power to transfer assets pursuant to a sound estate plan.
Who should you pick as your power of attorney? I think the best answer is,it should be whoever you trust the most. By signing the power of attorney, you are giving them the authority to not only pay your bills and make deposits for you, but also to sell real estate and transfer assets of any kind. Choose wisely.
Many people think that because their assets are held jointly that they do not need a DPOA, “because there is another name on the account”. But this in fact is not true. If you own real estate, both owners must sign the deed (or an agent under a DPOA). A power of attorney is also needed to transfer life insurance policies, sell stock or mutual funds and obtain medical records.
Power of attorney forms come in many types. There are LIMITED DPOA’s that are specifically for one certain financial transaction. GENERAL DPOA’s cover most everything. SPRINGING DPOA’s take effect only upon the person becoming incompetent. You should seek legal advice to determine which is the right one or ones for you.
I get a lot of my information from the internet. Our group, the Massachusetts Chapter of National Academy of Elder Law Attorneys has what we call the “list-serve”. On it, any one of our 500 members can ask a question and get assistance from someone who has dealt with the same situation in the past.
One of the recent pearls from this list-serve was the need that your durable power of attorney recite the actual property that you are authorizing your agent to be able to sell. This means all of your real estate should be listed in your power of attorney. This is one reason that we sometimes recommend updating your power of attorney.
Another strong consideration of why you should have a properly drafted DPOA is that in the event you were incapacitated it would eliminate the need for a court appointed guardian to transfer any assets. This is a costly and time consuming process. Without a DPOA, a guardian would have to be appointed and seek the approval of the court to transfer assets, even if to the spouse! This ability to avoid guardianship also applies to HEALTH CARE PROXIES.
This article gives general information and not specific advice on individual matters. Persons wanting individualized advice on matters discussed should contact an advisor experienced in those matters. To the extent this article provides information on legal matters, it is based on law in effect in Massachusetts on the date of posting (laws in effect in other states are often quite different).
Ronald H. Surabian is a CPA and attorney who works at the Elder Law Center in Saugus, Massachusetts. He also holds Masters in accounting and a Masters in tax law. He currently serves on the board of directors of the Massachusetts Chapter of the National Academy of Elder Law Attorneys. If you have any questions please call me at the Elder Law Center, One Essex Street, Saugus, MA 01906 (781)233-4444. To view this or any prior article, please visit our web site at www.elderlawcenter.org