Consider this common scenario faced by many families. An elderly woman with dementia has been living in a nursing home for the past year. Her children have been working hard to maintain her home and pay mom's bills. Mom is quickly running out of money and the kids decide that mom needs to sell her house in order to meet her ongoing (and increasing) financial needs. The children contact a real estate agent who quickly lists the home for sale and soon after a buyer emerges to purchase the home.
The buyer hires an attorney to help ensure that the transaction goes smoothly and that proper title is transferred to her client. The attorney reaches out to a child of the elderly woman and asks, "Is your mother able to understand and sign both the purchase and sale agreement and deed?"
Mom has not previously executed a power of attorney. A power of attorney is a legal document that allows someone (typically called an "agent" or "attorney") to make financial decisions on behalf of someone else (typically called the "principal"). If mom had previously executed a valid power of attorney, mom's named agent (presumably one of her children) likely would have been able to sign all of the necessary paperwork in connection with the sale on mom's behalf.
Given that there is no agent with the authority to sign on behalf of mom, the children would likely need to resort to a court proceeding in which the court would ultimately appoint an individual (most likely the same child that mom would have named as her agent under a power of attorney) to have authority to act on mom's behalf with respect to the sale. The court proceeding (known as a conservatorship in Massachusetts) might take several months, involve multiple attorneys (further depleting mom's limited resources), and given the delay, the buyer may go elsewhere and be unwilling to wait for the court proceeding to conclude.
As part of the estate planning process, your attorney can guide you through the considerations involved in selecting the right agent or agents to make financial decisions on your behalf. A power of attorney document can be as short as three or four pages, but if you become unable to make financial decisions on your own behalf, the ramifications of not executing this document can cost your family time and money.
A power of attorney can save your family time and money (and headache) if you later become unable to make financial decisions on your own. If you can contemplate any scenario in which someone might need to act on your behalf related to your finances, you should execute a power of attorney now (while you still can).
The foregoing has been prepared for the general information of clients and friends of the firm. It is not meant to provide legal advice with respect to any specific matter and should not be acted upon without professional counsel. If you have any questions or require any further information regarding these or other related matters, please contact your regular Nixon Peabody LLP representative. This material may be considered advertising under certain rules of professional conduct.