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NS-Second Marriages Create Planning Problems
Jan L. Warner & Jan Collins

Question: My second wife and I have been married for 12 years. She is 68, and I am 73. After much procrastination, we decided to begin our planning and went to a lawyer who helped us understand the process. This has led to many heated discussions, not about our wills, but about what happens if one of us becomes incompetent and can not handle business affairs.

She has three grown children and five grandchildren and wants to make sure they receive the bulk of the property she brought into the marriage. At the same time, I have one grown child and two grandchildren and have similar desires. We understand that this can be handled through a will; however, we are each concerned about what can happen if one of us becomes incompetent and the other acts using a power of attorney. Not that she would do so, but what if I become incompetent and her children talk her into transferring all of my assets to them or to herself, leaving my child and grandchildren out? Although we asked our lawyer how to control the acts under the power of attorney, he has not come up with any good solutions. Do you have any?

Answer: Your question is a difficult one. Because no one can predict the future, durable powers of attorney (meaning powers of attorney that continue past the incapacity of the person who signs) generally provide that the appointed agent -- often called a proxy -- will have broad authority in order to be able to deal with unexpected financial events. But broad authority carries with it the ability to abuse the power. Therefore, right off the bat, there is a conflict between the desire to give sufficiently broad authority and to control the acts of the proxy.

Since both of you obviously feel uncomfortable, you should consider either (a) appointing each other and creating lots of safeguards that, in the long run, may interfere with the activities that need to be accomplished, or (b) appointing a non-relative as agent.

Either way, if you inject too many safeguards, your proxy may find it too difficult to act and quit. And, just as importantly, banks and other third parties may refuse to deal with your proxy because you have made the situation too difficult.

You may consider using springing durable powers of attorney because they do not become effective until the person who signs becomes incapacitated and the proxy has no chance to abuse authority until then; however, after incapacity, many of the same problems exist. You may also consider appointing two or more agents who can act only if all agree; however, if they can't agree, then no one can act -- still another problem. You may give a third person -- like an accountant -- the right to audit the actions of the agent and, if warranted, to revoke the power of attorney. Or, you may choose to place a transaction limit -- say $10,000 -- without the proxy first getting permission from a third person to act. Or you may split responsibilities among a number of proxies so no one proxy has all of the authority.

But all of these potential solutions have drawbacks and problems: What if the third person you choose as a monitor or auditor is unavailable, dies, or becomes incompetent? And what if the bank or the person who wants to buy the property is not satisfied with whom has the authority? Since a proxy under a power of attorney is a fiduciary, most courts have the power to require accountings; however, if you leave these matters to the courts, then there is no real sense in having a power of attorney since what you are doing is, in effect, like using a guardianship or conservatorship which is handled through the court. No matter which way you cut it, unless you trust your agent, planning will be an expensive waste of time.

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