The Power of Attorney (“POA”) and Statutory Gifts Rider (“SGR”) are two of the most important documents drafted by an elder law attorney. The absence of or deficiencies in these documents increases the likelihood of the need to commence a costly guardianship proceeding to be able to implement many common elder law planning techniques necessary to preserve assets. While New York law provides for a statutory short form POA, the powers included in the statutory form are, unfortunately, insufficient when it comes to common elder law and estate planning techniques. Even where the POA is prepared by an attorney, if that attorney is not an elder law or estate planning attorney, it likely that the form has not been properly drafted to include powers necessary to allow for the implementation of proper estate and Medicaid planning techniques.
The Purpose of the POA and SGR
In 2009 and again in 2010, the New York State legislature entirely revamped the statute that governs the POA. While the revisions are too numerous to discuss in this article, the most recognizable changes were the appearance of the POA form and the addition of the SGR.
The purpose of a POA is to give another person (an “agent”) the authority to handle your financial and property affairs. The POA is effective immediately upon signing. The agent does not have to wait until you become incapacitated to act; rather, their authority and ability to act is immediate. The powers found in a POA are largely administrative powers (i.e., the power to pay your bills and the power to open a bank account).
The purpose of the SGR is to authorize your agent to enter into transactions that are considered “changes in beneficial interest” (i.e., the power to make gifts in excess of $500.00, the power to transfer assets to trusts, and the power to change beneficiary designations.) An SGR is a completely separate document that needs to be signed at the same time as the POA. Many people are unaware that an SGR exists, and some erroneously have executed an SGR years after executing the POA, rending the SGR ineffective.
Modifications to the POA
New York State law permits modifying the POA and SGR, and the key to a properly drafted and protective POA and SGR lies in the modifications added by an elder law or estate planning attorney.
A POA should be modified. The primary modification is adding the power to create, amend, revoke, or terminate revocable or irrevocable trusts. This power becomes imperative where an elder law attorney seeks to protect the value of a client’s home and other assets when planning for Medicaid. There are many other modifications that an elder law attorney will use.
Modifications to the SGR
It is important to reiterate that the single most common oversight is the failure to prepare an SGR. With that being said, the most common oversights in preparing an SGR is the failure to add modifications allowing the agent to (i) transfer assets in unlimited amounts and (ii) transfer assets to himself.
Both of the above modifications enable the elder law attorney to implement many techniques that create Medicaid eligibility. If you lose your capacity and the SGR does not allow the agent to transfer your assets, the SGR is relatively useless. Moreover, since your agent is usually the person that would be the recipient of the transfer (i.e., a spouse or child), not permitting the agent to make transfers to himself might necessitate using another family member or non-relative to receive your assets.
The failure to recognize the necessity of a POA and SGR is common. Once you commit yourself to an estate plan, however, having a deficient POA and SGR is unacceptable. If you do not have a POA and SGR or have documents that do not include the modifications discussed herein, please contact us.