Why you need a Durable Power of Attorney
Perhaps even more important than planning for your eventual death is planning for the possibility you will be disabled or incapacitated. If for some reason you were unable to manage your affairs what would happen? Injury, illness or age can leave you unable to transact your day -to-day business and look after your property and finances. Unless you have taken proper precautions, it may be necessary to go to court and have a conservator appointed to act on your behalf.
A Durable Power of Attorney (“DPOA”) is a legal document that enables you to designate another person, called the attorney-in-fact, to act on your behalf, even in the event you become incapacitated. It is “Durable” because it specifically states that it continues to be effective even if you become incapacitated. So, if you are incapacitated, your “attorney-in-fact” or agent, can use the Durable Power of Attorney to go to the bank and withdraw money, sign documents to sell or transfer real estate, or do pretty much anything that might need to be done on your behalf.
A Durable Power of Attorney is like a blank check, so you have to be certain that the person you name is going act in your best interest and in accordance with your wishes.
Possible complications with a Durable Power of Attorney
While a DPOA is an essential part of every estate plan, it is not a silver bullet. Some financial institutions may refuse to honor any power of attorney that is not on their own form or if they believe it is stale (more than a year or two old). A bank may be reluctant to honor a power of attorney because they may be worried about their liability for elder financial abuse. The larceny conviction of Brooke Astor’s son, who was able to steal more than $12 million from her using a power of attorney while she was incapacitated is a notable example of this type of financial abuse.
How to avoid problems with a DPOA
- Keep your DPOA up to date. All of our estate plans include Durable Powers of Attorney and we will update those annually at no charge at your request in order to make sure that your DPOA does not go stale.
- Ask your bank, brokerage house, IRA or other retirement plan provider, and insurance companies if they will honor your form of power of attorney and ask for their response in writing. If they say they will only honor powers of attorney on their own forms, obtain copies of those forms and provide them to your attorney to make sure they are completed properly.
- If you spend time in different states, set up durable powers of attorney that comply with the state laws in each place. Financial institutions are supposed to honor out-of-state documents but if you are dealing with a bank teller, he might not recognize and be willing to accept an out-of-state document. We can prepare DPOA’s for multiple states.
- Consider setting up a Revocable Living Trust trust to provide for the management of assets during a period of incapacity or disability in case the power of attorney approach breaks down and third parties will not accept the agent’s authority.