By: Carol A. Nolan, Attorney at Law
620 W. Roosevelt Rd., C-1
Wheaton, IL 60187
As the population grows older, legal issues of mental incompetence are taking on greater significance. Planning for possible disability and the continued management of assets is one concept of estate planning. There are three disability strategies for management of assets: Powers of Attorney for Healthcare and Property, Guardianship through the probate court, and Revocable Living Trusts. This article will discuss Powers of Attorney for Healthcare and for Property.
The Illinois Probate Act, 755 ILCS 45/2 et seq, Durable Powers of Attorney (hereinafter referred to as the "Act"), recognizes "that each individual has the right to appoint an agent to deal with property or make personal and health care decisions for the individual, but that this right cannot be fully effective unless the principal may empower the agent to act throughout the principal's lifetime, including during periods of disability, and be sure that third parties will honor the agent's authority at all times." The Illinois General Assembly enacted the Power of Attorney Act to address this need.
Powers of Attorney are the most convenient and inexpensive strategy for disability planning. There are statutory forms incorporated under the Act, but any form may be used. Attorney's fees to counsel and draft these powers are considerably less expensive than the other strategies. The statutory forms may even be purchased at local stationary stores, eliminating legal fees altogether. However, an attorney's advice at some level is certainly appropriate and prudent.
The Act provides in relevant part that the "principal may specify in the agency the event or time when the agency will begin and terminate, the mode of revocation or amendment and the rights, powers, duties, limitations, immunities and other terms applicable to the agency and to all persons dealing with the agency." The principal may designate the power is effective upon execution of the document or for example, upon a determination by their personal physician that they cannot give prompt and intelligent attention to their person or financial matters. Every agency may be amended or revoked by the principal at any time or in any manner communicated to the agent or to any other person related to the subject matter of the agency. Healthcare powers may be amended or revoked without regard to the principal's mental or physical conditions by several methods including an oral or any expression of the intent to revoke in the presence of a witness 18 years or older who then signs and dates a writing confirming that such expression of intent was made.
In a perfect world, the low cost, control by principal, and flexibility of powers of attorney appear to be the most appropriate strategy for disability planning. However, the potential for abuse is great, despite an agent's responsibility to their principal. In particular the Act provides that the agent shall use due care to act for the benefit of the principal in accordance with the terms of the agency and shall be liable for negligent exercise. The agent is under a duty to keep a record of all receipts, disbursements, and significant actions taken under the agency.
However, where a principal's mental capacity is diminished, he or she may not be able to monitor or review their agent's actions. Neither the court nor any other person has an obligation to monitor the agent. When an agent is an adult child of the principal, often that adult child is the only person having contact with the principal, and even when communication of revocation is stated to the agent, the agent may not honor it.
How then is the principal protected from agent abuse? The Act provides in relevant part, that "upon petition by any interested person and a finding by the court that the principal lacks the capacity to control or revoke the agency, the court may find that the agent is not acting for the benefit of the principal or that the agent's action or inaction has caused or threatens substantial harm to the principal's person or property. The court may order a guardian of the principal's person or estate to exercise any powers of the principal under the agency, including the power to revoke the agency. As well, the court may enter such other orders without appointment of a guardian, as the court deems necessary to provide for the best interests of the principal."
In all likelihood, interested parties do not have access to bank or medical records. Often the elderly disabled client fears or is dependent upon the agent and refuses to revoke the powers of attorney because that action may anger the agent. Siblings may argue over what is in the best interests for the parent principal; consequently, the sibling with the authority to act as agent may find their actions justifiably or unjustifiably questioned or even litigated. It is not unusual to have non-agent siblings take issue with the expenditures or medical decisions of the agent.
The Act also provides that an agent shall provide a record of all receipts, disbursements, and significant action when asked by a representative of a provider agency as defined in section 2 of the Elder Abuse and Neglect Act, 320 ILCS 20/1 et seq, when the representative is assessing an elder abuse or neglect complaint under that act, or (2) a representative of the Office of the State Long Term Care Ombudsman when investigating a complaint of financial exploitation of a nursing home resident 20 ILCS 105/1 et seq. Anyone can make an anonymous complaint.
Therefore, the principal's protection comes from an interested person's concern and willingness to file a petition asking the court to revoke powers of attorney because the principal will not or cannot do so, and/or reporting to the appropriate agency elder abuse or neglect. If, and when the court revokes the powers of attorney, guardianship proceedings may become necessary to adjudicate the disability and appoint a guardian.
Another situation may arise whereby an incompetent principal, necessarily hospitalized by their agent, revokes the power of healthcare (competency is not required to revoke) and discharges themselves from the hospital. If this occurs, the agent must also seek an adjudication of mental disability and appointment of guardianship.
To sum, powers of attorney are wonderful tools where the principal's agent is an honest, caring person who has the principal's best interests at heart, exercises a standard of care compliant with the Act, and whose relatives do not unnecessarily interfere. Unfortunately, all too often these circumstances do not exist. It is best to discuss the pros and cons of executing powers of attorney with an estate planning or elder law attorney who can review the client's entire estate plan and goals.