When clients come to meet me for estate planning and a general review of their affairs, one of the first documents we discuss is a Durable Power of Attorney (“POA”). This document can be used to name a trusted person or company to handle affairs on your behalf, even when you are no longer able to mentally and/or physically handle them yourself. This can avoid a Court being involved to appoint a Guardian. A POA can be broad or limited in time and scope. You can name one person or several, including backups. Primarily, a POA is used for banking and investments and to handle real estate transactions; but can cover almost any type of financial and property decision, inquiry, or transaction. Every State has separate laws and how to create a POA. Indiana requires it to be in writing and signed and notarized to become effective.
The problem arises when a federal agency becomes involved. For example, a parent had a stroke and can no longer handle their affairs and do have a properly broad POA in place naming her daughter; but a client’s appointed POA calls me and says that they are trying to inquire regarding Social Security benefits or to change the bank for deposits of their parent’s Social Security retirement, and Social Security will not speak to them, and refuse to accept the POA. Generally, federal agencies won’t accept a POA from any State.
Social Security says that the parent needs to have a representative payee appointed to deal with them since the POA is not valid for federal benefits. How do you become a payee? You must complete forms in person, or online with Social Security (SSA-11). Social Security does its own independent investigation and makes its own decision if you will be appointed as a payee. The payee must keep records and do an annual accounting, and keep the money separate from their own, and used for the parent exclusively.
Can you do anything in advance like is done with a POA? Yes, Social Security now allows a person to name a person(s) in advance to consider if a payee is ever needed in the future. However, Social Security will still conduct and independently appoint a payee but will consider these people first if an advance designation is on file. You can do this online or by phone at 1–800-772‑1213.