Powers of attorney, like many estate planning documents, can be extremely broad or specific. The key to obtaining a power of attorney that will achieve the objectives you want from your estate plan is making sure that your document is sufficiently specific to cover the powers that must be named explicitly, while also remaining adequately broad to address all the issues that might arise in the future.
A ruling from Kentucky's highest court offers some good “food for thought” whether or not you live in that state. The ruling determined that a general power of attorney was insufficient to allow an attorney-in-fact to make decisions that involved the waiver of certain fundamental rights. This decision shines a spotlight on the idea that, if you're considering an estate plan, or a plan update, you should make sure that your power of attorney (POA) documents are adequately specific to accomplish the goals you want to achieve.
The September 2015 case involved three Kentucky resident each of whom created a power of attorney. In each circumstance, the POA named a close relative as the attorney-in-fact. (Two of them named a child, the third named a spouse.) Each of the three powers were general POA documents, meaning that they granted to the attorneys-in-fact general authority to make decisions on behalf of the people who executed the powers.
Sometime after executing the POA documents, each of three people who had executed them entered nursing homes. The nursing homes required that their new patients complete application forms, which included an optional form requiring all disputes between the patient and the nursing home be arbitrated instead of being brought directly to court. In each situation, the attorney-in-fact completed the admission paperwork for the patient and, in each situation, the attorney-in-fact signed the arbitration agreement.
Unfortunately for all three of the patients, each of them also died shortly after their admission to the nursing homes. Each family sued their respective nursing homes for wrongful death. The trial courts in Kentucky issued a mixed bag of rulings, with some ruling for the families and some favoring the nursing homes and their arguments that the arbitration agreements must be enforced.
Ultimately, the Kentucky Supreme Court resolved all three cases in favor of the families and their right to sue. The arbitration agreements were not enforceable because the attorneys-in-fact signed them and they did not have the legal authority to make those decisions. Agreeing to arbitrate instead of suing involves the waiver of a fundamental right and, according to the court's ruling, an attorney-in-fact can waive a fundamental right only if the POA under which she is acting expressly authorizes her to make such decisions. In these three instances, the POA documents only conferred general authority to the respective attorneys-in-fact, so the POAs were insufficient to allow the attorneys-in-fact to enter into arbitration agreements on behalf of the patient.
As you contemplate creating a new estate plan, or updating your existing plan, you may want to consider the possibilities regarding your future need for nursing home care. Depending on the law in your states, if you want your attorney-in-fact to have the power to make decisions like signing arbitration agreements within nursing home application packets, you should be sure that your POA explicitly gives your attorney-in-fact to power to do so. These cases also highlight how, in some states, it is imperative that your POA include certain explicit grants of authority to your attorney-in-fact in order to function the way you want.