Representation Agreements and Powers of Attorney – Part 2 of 3 #319
By Gerry Neely
A representation agreement (RA) will be the principal document used to appoint someone you trust to make your medical, personal care, financial and legal decisions. There are two types of RAs. The first is a simple representation agreement (SRA) which gives the representative the authority to make routine legal and financial decisions, and limited daily living and health care decisions. Examples include the payment of bills, withdrawal of monies from a bank account, dental checkups and tests to determine whether health care is necessary.
Routine financial matters do not include the purchase or sale of real estate, the renewal of a mortgage for more than the amount outstanding on the loan at the time of renewal, or a new loan. The reason for this limited responsibility is that an SRA allows a person of diminished mental capacity to appoint a representative, if it is clear that the person making the appointment understood the nature and effect of the power given to the representative.
The second RA is an enhanced representation agreement (ERA) which gives the representative authority to make complex financial and legal decisions, such as when and how to sell the adult’s business and/or real estate, and complex personal and health care matters, such as refusing life supporting care or treatment. This is the agreement that would be most important to a licensee.
Another distinction between the two agreements is that the SRA can be prepared and signed without the assistance of a lawyer, while the ERA, because of its broader powers, requires the services of a lawyer.
The lawyer’s responsibility is to make certain you understand what the broader powers mean and the effect of giving those powers to your representative. The lawyer must complete a prescribed form of certification that the provisions of the ERA have been explained to you and that you understand the consequences of giving such wide authority to the representative.
Given these broad powers, which may extend to making life or death decisions for you, choosing the right representative is of paramount importance. Normally the representative will be a close family member, a spouse or child. However, you may choose a close friend, both for the friend’s objectivity and to avoid conflict among family members.
You must also consider whether appointing a close relative, who is also a beneficiary of your estate, might pose too difficult a conflict between the representative’s self-interest and duty to you. If your assets are substantial, and you would like to spend your declining years at home rather than in a nursing home, you might choose a close friend as your representative rather than the beneficiaries of your estate, who might be reluctant to see your capital assets depleted to provide costly around-the-clock assistance.
You can appoint more than one representative, but, if you do, you must set out the powers each is to have. If they share the same powers, you must state whether they may act separately or whether they must act together. You may, and probably should, name an alternate representative because the representative does not have the power to delegate his or her authority. The agreement must state the circumstances under which the alternate will take over as the representative.
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