What Is The Value of a Durable Power of Attorney?
The Durable Power of Attorney is an excellent planning device for most people. It is particularly useful for individuals who are concerned about incapacitating physical or mental conditions.
In the discussion that follows, the major highlights and benefits of the Durable Power of Attorney (DPA) are briefly explained. The discussion is not intended to be exhaustive, and legal counseling is recommended for persons interested in signing such a document.
What is a "Power of Attorney"?
A Power of Attorney is a document in which you give another person, the "attorney in fact," the legal authority to act on your behalf. This authority can be limited to a particular asset, a particular transaction, or a particular period of time. It can also be general, such that it conveys broad authority to act on your behalf.
How is a "Durable" Power of Attorney Different?
A regular Power of Attorney is valid only so long as the person signing the document has the capacity to understand its significance and meaning.
The "Durable" Power of Attorney can be of two (2) types, either of which ensures its validity even if the person has become incapacitated.
- Effective immediately: This type is effective when signed and remains effective even if the person becomes completely incapacitated.
- Effective upon incapacity: This type becomes effective when and if the person becomes incapacitated.
What Powers can be Given in a Durable Power of Attorney?
The power to handle all of a person's assets can be conveyed in this document if it contains necessary sophisticated language. This includes the power to invest and sell assets, to enter into contracts, to collect and recover assets, to make gifts and deal with all types of insurance, to operate or sell a business, and to handle tax and trust issues.
Should it be Used for Medical Care Decisions?
No. There is a special document that should be separately prepared. It is called an Advance Health Care Directive. (For more information about this document, see the article on Advance Health Care Directives)
What are the Benefits of a Durable Power of Attorney (DPA)?
In many instances, a DPA can avoid the need for a conservatorship of the estate. This type of conservatorship involves a court hearing in which one person -- the "conservatee" -- is found to be unable to handle his own affairs, and another person -- the "conservator" -- is appointed to handle his affairs. A conservatorship can be an expensive process, and ongoing court supervision is required.
A properly drafted DPA satisfies the need for "surrogate management" by having such a person appointed while the giver of authority still has capacity. It is a simple, relatively inexpensive document.
It also enables an individual to choose the person who will act on her behalf. While the individual may nominate the person of her choice to be her conservator, the courts have final authority to appoint the conservator in conservatorship proceedings.
Conservatorships can, however, be highly protective because of court supervision and review. That is, a conservatorship can be the better approach when there are concerns about the "best interests" of the individual, and s/he either lacks capacity to sign a DPA or has no one s/he wants to name as her/his "attorney in fact."
Another benefit of the DPA is that the giver of authority retains a strong measure of control over his/her life and affairs. This can be particularly important to elders who are losing capacity and are aware of such loss.
Are "form" Durable Powers of Attorney available, and if so, should they be used?
Forms are available but are rarely adequate. If they are to be used, they should be used only after advice from an attorney who has a sophisticated understanding of their uses and limitations. There are a number of reasons for this warning.
- These documents convey an enormous amount of authority. An "attorney in fact" typically has virtually complete control over a person's assets. It is frequently necessary to go beyond the forms to build in protections for the signing person.
- Special needs, concerns, and limitations often necessitate the drafting of a personalized document.
- Some forms require the person to choose from various options that are included in the document, but do not explain the existence or implications of such choices.
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The Durable Power of Attorney, if properly drafted, is one of the least expensive forms of insurance a person can buy. Even more important than documents which specify how we want things distributed upon death, the Durable Power of Attorney specifies how we want things done while we are still alive, but unable to manage our affairs. Anyone who is age eighteen (18) or over should prepare and execute this document.
Note: This article provides information, it does not constitute legal advice.
Gilfix & La Poll Associates LLP attorneys practice elder law and estate planning and are available to answer any questions about Trusts, Durable Powers of Attorney for asset management, Advance Health Care Directives, and any other appropriate planning options.