2nd Marriages Part 3--Power of Attorney and Health Care Proxy

September 28, 2012

This edition of the Koldin Report E-Newsletter is Part 3 of a series on planning considerations for second marriages.

Second marriages with separate families requires careful estate planning considerations. Without proper thought as to the consequences of different planning options, unintended and unforeseen results can occur.

In the previous editions of this series, we discussed how one spouse's family could be unintentionally disinherited if their Last Wills and Testaments are not carefully prepared and how other planning options such as the use of Trusts can be used to accomplish desired objectives.

In this edition we will discuss Powers of Attorney and Health Care Proxies in second marriage situations.

A Power of Attorney designates one or more persons you appoint to handle your financial affairs in the event of incapacity. The Koldin Law Center, P.C. has prepared a specially designed Power of Attorney which contains numerous additional powers beyond the standard form which we feel would be invaluable if a catastrophic illness occurs. The Power of Attorney can include an optional Gift Rider which allows your agent to be able to make gifts to others on your behalf. This Gift Rider can be written to permit your agent very broad powers or very limited powers.

A Power of Attorney is a very important document since it authorizes your agent to handle your affairs and avoids the need for a Court appointed Guardian in the event of a catastrophic situation. A Power of Attorney that contains broad powers will also allow your agent to take steps to protect some or all of your assets in the event of a catastrophic illness and qualify you for Medicaid coverage.

However, there is a risk that your agent could misuse the Power of Attorney to defeat your wishes. This concern needs to be addressed in a second marriage context. Although your agent has the duty to act in your best interests and carry out what he/she believes to be your wishes, the reality is that there can be a disagreement about your wishes.

For example, suppose you appointed your spouse as your agent and provided him/her with broad gifting powers, including the power to make gifts to himself/herself. Now suppose your spouse transferred $20,000 of your funds to himself/herself and then you died a year later. If your Will left all your assets to your children, would they now have a claim against your spouse for misuse of the Power of Attorney? Suppose instead that your Will left $50,000 to your spouse with the balance to your children. Would your children now have a valid claim that the $50,000 should be reduced by $20,000 so that he/she should only inherit $30,000 from your Will?

The above example shows the need for making your wishes clear not only in the Power of Attorney document, but also in your Will and Living Trust. You may want to also consider having multiple agents appointed on your Power of Attorney and require more than one signature to make gifts.

A Health Care Proxy designates the person you appoint to make medical decisions for you in the event of incapacity including the removal of life support. In a second marriage, careful thought needs to be given as to whether your spouse or your children should make the ultimate decision on when end of life treatment should be terminated. You can make your directives in writing in your Health Care Proxy. It is important that you advise your entire family of your wishes and the directives set forth in your Health Care Proxy to avoid conflict and maintain family harmony.

The Koldin Law Center, P.C. works with families of second marriages to utilize estate planning options to meet their objectives of supporting each other and protecting each spouse's children.