We all want to save time and money when possible. So, when I am asked if the standard Wisconsin power of attorney for finances is sufficient, I understand the motivation to put a crucial document in place quickly and economically. The state form is legally valid and will give your agent certain powers to manage your finances.
However, when it comes to complex financial decisions, like those we often navigate when planning for Medicaid and long-term care, the following four factors should be considered before you settle for the standard form.
- Limited Gifting. When conducting Medicaid planning, it is often necessary to make gifts to achieve certain goals. The standard power of attorney will limit your agent’s ability to make gifts by requiring gifts to be less than the annual gift tax exclusion (currently $15,000). Although this limitation helps protect you from your agent making excessive gifts, it may limit your ability to engage in Medicaid planning. When engaging in Medicaid planning, it is often desirable to make gifts in excess of the $15,000 exclusion. A custom power of attorney for finances can provide both flexibility and protection. It can limit your agent’s ability to make gifts under normal circumstances to a maximum amount, and provide an exception to allow your agent to make larger gifts under certain circumstances, such as Medicaid planning.
- No Ability To Create Trusts. The standard power of attorney for finances will allow your agent to deal with trusts that you have already created, but it does not allow your agent to create new trusts for your benefit or protection. Medicaid planning, however, may require the use of certain trusts to help protect your assets while allowing you to become eligible for Medicaid. A custom power of attorney for finances can allow your agent to create irrevocable trusts, special needs trusts, or pooled-trust accounts (e.g., Wispact) for you.This trust-creation ability for your agent can be vital, especially when dealing with special needs planning. If the power of attorney document doesn’t allow your agent to create certain trusts, a guardian will need to be appointed to carry out that task.
- No Ability To Classify Property. For a married couple in Wisconsin, the ability to classify property as individual or marital is a key component in Medicaid planning. The standard financial power of attorney form does not provide your agent with the ability to enter into any type of marital property agreement. To properly plan for Medicaid, a married couple should have the ability to classify or re-classify property. Even some custom powers of attorney limit the types of marital property agreements that can be entered into, so you should have an experienced elder law attorney review or draft the power of attorney to ensure the necessary powers are given to your agent.
- No Ability To Change Beneficiaries. Changing beneficiaries on life insurance, annuities, or retirement benefits is typically part of the Medicaid planning process. The standard power of attorney for finances will allow your agent to do many things related to those types of assets, but it will not allow your agent to change the beneficiaries. There are some assets that must have the State of Wisconsin listed as a beneficiary in order to qualify for Medicaid. Not having the ability to make that change may prohibit receiving benefits you may need. A custom power of attorney would authorize your agent to make those necessary changes.
Sometimes life can be more complicated than we prefer. While there is a time to simplify things and try to be thrifty, when dealing with the uncertainties of life and management of your assets, it is sometimes preferable to pay for professional services to make sure your agent can do all that is necessary to make sure you receive the care you need. Before you download the standard form and call it a day, I encourage you to meet with a qualified elder law attorney to discuss your own custom financial power of attorney.