Powers of Attorney & the $100 Trillion Problem
As a divorce lawyer in recent years, I found over time that a lot of my work was shifting toward what is dubbed “gray” divorce. This also brought me to see a new phenomenon in the world of estate planning. It’s called “following the money.” In late September I attended a seminar devoted to Guardianship and Powers of Attorney. As a newcomer to this field what I heard was quite similar to domestic relations law. I would term it 19th century law trying to regulate 21st century transactions.
A 19th century death was fairly easy. The decedent owned the farm and died surrounded by family. He or she would make certain that any surviving spouse was cared for and the children would see the remaining assets divided equally. Aside from the farm and its implements we might be dividing some bank accounts and personalty. Not many people had real money.
A June 2024 US News & World Report informed us that people born before 1945 (age 79+) control $20 trillion in assets. Baby boomers (age 60-79) control $78 trillion. That is nearly twice as much money as all other Americans born from 1981-1996. Suffice to say these younger folks see their parents and grandparents still presiding over enormous amounts of money and can look upon that wealth longingly.
We all know the conventional aspects of estate planning. Will; perhaps a trust. Medical directive. Power of attorney. We all know that powers of attorney can be troublesome in the hands of unscrupulous appointees. And while we could spend days vexing the matter of whether today’s children are more or less caring for their elders, one fact is crystal clear. The amount available to be pilfered from parents and grandparents is unparalleled. And we navigate in a world of electronic finance where older folks are seeing their pockets picked by people they never have met and never will meet. So, many children are pushing their parents to let them manage their parents’ funds using a power of attorney.
In olden times, if you had some money, you had your lawyer draft the estate package. You probably appointed your eldest child to be your designee as executor, medical power and “attorney” should you have physical or mental incapacity to manage. If you were in an accident or a state of mental decline, your banker knew it because you seemed confused at the teller’s window. Your doctor knew it because you saw him/her three times a year to get your prescriptions renewed. Your estate documents were kept in a thing at the bank called a “safe deposit box.”
In small town America some of that is still possible. But in urban and suburban America the bank tellers are now machines. Yes, there are general medical practitioners around but most medical care is specialized. The cardiologist provides the statins, the dermatologist is for steroids and ophthalmologist serves up the eyedrops. Not many spend time assessing your mental state unless you threaten them during the appointment or question why you were in the waiting room for an hour. None of these machines or people is really assessing you for either cognitive or emotional decline. What would you think if you were served with a letter from your urologist suggesting that you might need a court appointed guardian to manage your affairs?
In olden days, if you had your dad’s power of attorney you could wander over to the local brokerage and show it to dad’s broker. Once the broker reviewed it you could trade his stock. You could take money out of the bank, but if it was a lot, the teller or the branch manager was likely to ask what was up and how come dad didn’t come in with you.
But this is the electronic age. You can apply to mortgage dad’s house on line. You can sell dad’s house to an out of state investor and probably do the closing on line. You can wire the proceeds to an offshore account or put it in crypto-currency. And a lot of this can be done while dad is watching the ballgame on television in the next room. And once a power has been accepted by a bank or brokerage, you can transfer dad’s money from thousands of miles away.
This is going on. We know that parents are supporting their adult children and most are happy to help. But there is a developing trend of adult children helping themselves without bothering to ask employing powers of attorney to do so. Again, in olden times, there wasn’t much to loot, but today $98,000,000,000,000 is a lot of money by anyone’s measure.
In the guardianship world, where the court appoints someone to manage the affairs of an incapacitated person, there are annual reporting requirements. Candidly, it would be wise for the laws to be amended to require that powers of attorney be recorded in the local courthouse and for those vested with legal authority to provide an annual report of just what “powers” they exercised during the preceding year.