POA for client with dementia and no immediate family

[untanglesknotsinbooks]

I have a new client who was diagnosed with dementia several years ago. Unfortunately, they do not have immediate family. Luckily, one of their long time friends stepped in, and the client signed POA for financial and medical matters to the friend. The friend has helped them clean up their finances, stave off foreclosure of the house, sell it, and get them into a care home. They are in full time care, but still lucid.

I'd like to get a POA on file with the IRS at some point and have the friend added as well, but I'm not exactly sure how that would work since this person is not allowed to practice before the IRS, yet there has to be some way to get it done. How do I deal with this once she's no longer lucid enough to sign her return or deal with any other potential tax matters?

Can anyone point me in the right direction?

Thank you in advance for your help.

[BobKamman]

"How do I deal with this once she's no longer lucid enough to sign her return or deal with any other potential tax matters?"

You don't.  You work with what you have. The taxpayer can sign a Form 2848 to you, if not mentally incapacitated.  

IRS would like the friend's PoA to specifically include authority to sign tax returns, but if it doesn't, no one is looking anyway.  If the friend wants to go to court to be appointed conservator, that's the next step.  Which, in most cases can be avoided.  

[Tributos]

It's best when we keep things simple, but the friend might ask for an initial consultation with a local attorney (most often in cases like this the initial is free). I foresee inevitably this would involve probate. I went through this with both parents.

If they are named as Guardian/Conservator (in some states, they are separate) yet a Durable POA in my experience for the friend would work. If a physician has 'officially declared' a dementia diagnosis - it could be dicey having the taxpayer sign anything.

It's a great person that is stepping in - it can get rough. The more they 'know' ahead of time, the better off the journey will be.

[BobKamman]

" If a physician has 'officially declared' a dementia diagnosis - it could be dicey having the taxpayer sign anything."

Many patients are diagnosed with dementia long before they lose so much mental capacity that they can't appoint someone else to take care of everyday business.  And it is rare (to say the least) for IRS to "get dicey" with whether a Form 2848, or power of attorney delegating tax matters, is valid.  What is the auditor or revenue officer going to do -- demand to deal directly with the taxpayer they are claiming is incompetent?

[Tributos]

I'd like to clarify that my intent was not to challenge your comment. Yes, from the IRS perspective, I could not fathom them going to that degree of questioning.

My perspective was from being in a very protracted court case, where signing Wills, Trusts, et al. 'may have' been challenged by the court based upon the 'competency' of the individual signing them.

My point was to strongly suggest currently while the TP is able, that having a POA (sounded like that is not in place?) established with the court, thereby the IRS.

I took the phrase that someone stepped up - which is great - sounds like they could use some legal foundation. Doesn't hurt to ask, right?

[BobKamman]

It's all a creature of state law.  I haven't heard of a PoA being "established by the court," but maybe that happens in some places.  The PoA is usually a tool to stay away from court.  

Some people used to recommend making a brief video of the person signing a PoA, long enough to show lucidity and comprehension.  But these days with AI, I suppose even that could be faked.