What Is a Durable Power of Attorney?
The main focus of any estate plan is ensuring assets are divided according to the principal’s instructions after s/he dies. However, life doesn’t always unfold that simply.
A durable power of attorney is an essential component of any estate plan, ensuring the plans are carried out if you become mentally/physically incapacitated as the result of an accident, illness, or medical diagnosis.
Here are some quick facts about Durable power of attorney
A durable power of attorney (DPOA) is different from a general POA because, in addition to acting on behalf of the principal, the DPOA can also make decisions for the principal if the individual is physically/mentally incapacitated. The responsibilities associated with a DPOA are only revoked at the sound instructions of the principal or after a principal has died and the estate plans have been carried out.
The DPOA is a document, with very specific wording and instructions/parameters around what the designated in the DPOA (called the “agent”) can/can’t do, as well as to the circumstances surrounding when s/he can take action on behalf of the principal. In other words, a POA is entirely customizable; the named agent can have broad or very limited authority to make legal decisions about the principal’s property, finances, or health care. It can be as temporary or as permanent a the principal chooses. For example, a single parent might put a POA in place if s/he needs to leave the country for a period fo time, removing it again upon his/her return.
Some of the most common tasks or responsibilities handled by a POA include:
- Paying bills, including check signing privileges
- Conducting business transactions
- Buying/selling or managing real estate
- Handling legal or insurance claims
- Filing tax returns
- Making medical decisions
- Borrowing money
- Making decisions about minors if there is no other parent or guardian present
- Buying and giving gifts
Financial, business and medically-related decisions become incredibly complicated for others to navigate if you are incapacitated and a POA is not in place.
As with any aspect of an estate plan or living trust, you can revisit your documents and make changes around who has the POA and what s/he has power to do, at any time.
When a POA is Used
Typically, a POA comes into play if/when the principal is:
- Physically unable to sign legal/financial documents
- Mentally incapacitated or disabled due to illness, coma, dementia, or another condition
- Physically out of the country when essential business, financial, or legal decisions must be made
While your estate plan is created with the hopes and vision that you will live a long life, pass on, and then the estate’s assets will be settled, the reality is that: car accidents, natural disasters, ad unplanned medical crises are all possibilities. You want to protect your estate in case of any event.
Choose a POA You Trust Implicitly
Most often, the designation of POA is assigned to a spouse, then adult .child. However, for more complex or large estates, it can be wise to assign a trustworthy POA who is not closely related to you. Choosing a trusted friend, acquaintance or legal/financial professional can also be helpful in blended families or families with a dramatic – or traumatic – history around who is entitled to what, and when, in the event of your death.
Think wisely before naming the person who has the DPOA. While we want to hope for the best, experienced estate planners know that we have to help our clients secure themselves in case of the worst-case scenarios as well because, unfortunately, they do happen.
- Do not name a POA just because s/he is the oldest, or has asked, or because you fear hurting someone’s feelings. Assign the person you trust the most and who is the most capable of making decisions as you would have made them.
- It should be someone who is able to carry out the duties, who you trust implicitly, and who you feel is responsible, honest, and has integrity.
- Never feel obligated to name a family member or friend.
- If your estate is on the larger side, consider hiring a financial professional who can operate without bias and who will be paid for their time.
- Always inform the potential agent. Never assign the role without asking first. It is a large responsibility, so agents deserve the chance to learn more about the responsibilities before saying yes or no to your ask.
Work With an Estate Lawyer to Create a Binding DPOA
While you can use boiler-plate, online documents to create a legal POA, we highly recommend spending the reasonable fee charged by professional estate professionals to ensure your POA covers all of your needs, including future and potential, and that it is legally binding.
Read, Why DIY Estate Planning is a Bad Idea.
The last thing you want is for your estate plans to be challenged, and changed because the documents weren’t filled out correctly or weren’t as comprehensive as they should have been.
We’re Here When You’re Ready
Are you ready to get started on your estate plan and the selection of a durable power of attorney? Schedule a consultation with us here at Tseng Law Firm, estate planning attorneys who care.