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Incapacity - Financial Issues
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There are a variety of legal tools to help in planning for the administration of your financial affairs in the event you become incapacitated. See the separate discussions below concerning conservatorships and guardianships.
At its simplest, a “Power of Attorney” is a document in which you authorize another person to act on your behalf. A power of attorney can be drafted very narrowly for a specific transaction or situation, or very broadly. Conceptually, the power of attorney has been with us for centuries, and its modern-day version is generally referred to as a “common law” power of attorney. If a common law power of attorney is drafted to be “durable”, it continues in effect after your incapacity, but without language making it “durable” it the power of attorney will lose its efficacy upon your incapacity.
The Minnesota Legislature has also created another form of power of attorney, known as the “statutory short form power of attorney”. The statutory short form power of attorney appears at Section 523.23 of Minnesota Statutes. This form contains a checklist from which you can select different powers to grant to your attorney in fact, including “all of the above”. The statutory short form also allows you to specify whether you want it to continue in effect in the event you become incapacitated or incompetent.
If you use the statutory short form power of attorney you must follow the statutory language very carefully. An advantage of the statutory short form power of attorney is that it is more widely recognized, for example by banking institutions and in real estate transactions, because its meaning and effect are set forth in the statute. A disadvantage of the statutory short form power of attorney is that in some situations it may not adequately describe the authority you wish to convey. You should obtain legal counsel for advice about which form is better for you, and precisely what it should say.
Do you know a Social Security recipient who may be unable to manage his or her own finances? The Social Security Administration does not recognize powers of attorney, but does recognize “Representative Payees”, who are authorized to receive and manage benefit payments for recipients of both Social Security and Supplemental Security Income benefits. The Social Security Administration has estimated that approximately 25% of Supplemental Security Income recipients, and approximately 10% of Social Security recipients, receive their benefits through Representative Payees. Representative Payees must account for their funds handling periodically to the Social Security Administration, and are also obligated to report changes in circumstances. Beneficiary funds cannot be mixed with the Representative Payee’s own funds. A nursing home or similar facility can create a “collective account” to receive and manage funds for its residents.
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