A durable power of attorney is one of the most important estate planning documents you can have. It allows you to appoint someone to act for you (your “agent” or “attorney-in-fact”) if you become incapacitated. Without a power of attorney, your loved ones would be unable to make decisions for you or manage your finances without asking the court to appoint a guardian or conservator, which is an expensive and time-consuming process.
Many do-it-yourself power of attorney forms are available; however, it is highly recommended to have an attorney draft the form for you. There are many issues to consider, and one size does not fit all.
The agent’s powers
The power of attorney document sets out the agent’s powers. Powers given to an agent typically include buying or selling property, managing a business, paying debts, investing money, engaging in legal proceedings, borrowing money, cashing checks, and collecting debts. They may also include the power to consent to medical treatment. Some powers will not be included unless they are specifically mentioned. This includes the power to make gifts and designate beneficiaries of your insurance policies.
The power to make gifts of your money and property is particularly important. If you want to ensure your agent has the authority to do Medicaid planning on your behalf if you need to enter a nursing home, then the power of attorney must give the agent the power to modify trusts and make gifts. The wording in a power of attorney can be significant, so it is necessary to consult an attorney.
Springing or immediate
The power of attorney can take effect immediately or become effective only once you are disabled, called a “springing” power of attorney. While a springing power seems like a good idea, it can cause delays and extra expense because incapacity must be determined. If the power of attorney is springing, it is very important that the method for determining incapacity is clearly spelled out in the document.
Joint agents
While it is possible to name more than one person as your agent, this can lead to confusion. If you have more than one person named, you need to be clear about whether both parties need to act together or act independently. It might make more sense and be less confusing to name an alternative agent to act in case the first agent cannot.
Appointing a guardian
Another use of a power of attorney can be to nominate a guardian in case guardianship proceedings become necessary. Including your preference for a guardian can allow you to have some say over who will be managing your affairs. Usually, the court decides who will be chosen as a guardian, but in most circumstances, the court will abide by your nomination in the durable power of attorney.
Executing the power of attorney
To be valid, a power of attorney must be executed properly. Some states may require a signature, others require the power of attorney to be notarized, and others may require witnesses. It is important to consult with an estate planning attorney in your state to ensure your power of attorney is executed properly.
Accepting a power of attorney
Even if you do everything exactly right, some banks and other institutions are reluctant to accept a power of attorney. These institutions fear a lawsuit if the power of attorney is no longer valid. Many banks or other financial institutions have their own standard power of attorney forms. To avoid problems, you may want to execute the forms offered by the institutions with which you have accounts. But be careful not to sign a bank’s document that inadvertently restricts a power of attorney’s ability to deal with other assets, and you should check that any documents you sign with a bank match the original power of attorney.
For more information on powers of attorney, click here.
This article is for informational purposes only and shall not be construed as legal advice. No attorney-client relationship between the reader and Brennan & Rogers, PLLC, or its attorneys is intended. This article should not be used as a substitute for legal advice. Laws may vary from state to state, and the educational materials found in this article may not apply in all jurisdictions. Brennan & Rogers, PLLC | 279 York Street, York, ME 03909 | 207-361-4680 | admin@brennanrogers.com
