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 General Introduction to Powers of Attorney Generally a Power of Attorney gives a person the right in some capacity to act on your behalf in your affairs. A person with sound mind and no mental incapacity can give another person the authority to act for them. This power to act can be specific or general in nature. That is, you can give a person the power to sign your name to a loan document if you are out-of-state for example. This is a specific power. Or, you can give a person the power to act and sign all of your legal matters, including checks, bills, contracts, statements, loans, mortgages, guarantees and other items. Obviously, one should be extremely careful about giving anyone the general power of attorney, since it is very broad and you will be liable for all matters entered into by your agent. See the section on General Power of Attorney. Durable Power of Attorney A Durable Power of Attorney is much like a Power of Attorney but with one critical difference: The Durable Power of Attorney remains valid even if you are incapacitated or rendered mentally incompetent or unable to handle your affairs. In fact, this is the specific purpose for a Durable Power of Attorney. This legal document enables you to plan for an emergency which you may not fully expect or anticipate. Helps to Avoid Conservatorship This document is a critical document for many people to have, since not having a valid Durable Power of Attorney in place can leave at least two areas of your affairs unprotected: (1) any Power of Attorney which you have executed becomes void or invalid on the date of your incapacity or death, so that even if a person has a Power for Attorney, they cannot act in your behalf; and (2) if you are rendered incapacitated unexpectedly, a Conservatorship, which can be a lengthy and expensive court proceeding, might have to be undertaken to manage your affairs. One can imagine that the date and time of incapacitation is not always clear. Needless to say, one can guess at the amount of lawsuits and court battles over the question of when a person became incapacitated. And, in most states, a Conservatorship is the legal proceeding by which the court orders a person(s) to manage your affairs and oversees this person(s) in their management. Sometimes, a Conservatorship can be opened in court for a person who may not believe they are incapacitated in any manner. Conservatorships are generally protracted legal battles, with lawyers representing each of your family members, or groups of family members, and lawyers representing other related interest in your estate, even though you may live for another 30 years! Thus, one can easily see the benefit of having a legally recognized document, which is valid in your state, which may become effective and specify who and how to govern your affairs, if you become incapacitated. This one simple document can save thousands of dollars in legal fees, and thousands of hours in time wasted in an unnecessary court proceeding. Difference Between Durable Power of Attorney and Durable Power of Attorney For Healthcare A Durable Power of Attorney is similar to a Durable Power of Attorney For Healthcare. However, the main difference is that the Durable Power of Attorney for Healthcare limits your agent to making decisions for you about your medical treatment and related matters. An agent designated in a Durable Power of Attorney For Healthcare would generally be prohibited from making decisions regarding any of your other business affairs. For example, a Durable Power of Attorney For Healthcare cannot designate an agent to sign for a loan to help your family make mortgage payments during a temporary incapacity. A Durable Power of Attorney may, if you so choose, confer upon your designated agent the power to sign such a loan. The Durable Power of Attorney is created by you, in advance of any problems, or any expected problems, to designate an agent who can make certain decisions for you, in the event you become incapacitated. These decisions can be specific and limited to certain acts, or they can relate to all of your affairs, whatever legal matters may arise. For the same reasons mentioned above regarding a Durable Power of Attorney For Healthcare, one should be very careful about whom one selects as an agent, and what powers are conferred on this agent. Remember, in most cases, this agent will have authority to write checks and/or transfer money from your bank accounts. Obviously, this person designated should be extremely trustworthy. Especially Important When You Do Not Expect to Use It The most important thing to understand when thinking about this issue is that if you are over 18 and have any family, and you are reading this and saying to yourself, I am probably not old enough to worry about mental incapacity, think again! You are precisely the person whose needs are sought to be met with this legal document. The Durable Power of Attorney is most often prepared when there are no pending problems, or when there is not even a thought of pending problems. The law recognizes that the most mentally sound person can suffer an unexpected accident which causes a temporary or permanent incapacity. Without this Durable Power of Attorney, your family or associates will have no choice but to institute lengthy legal proceedings and attempt to appoint a conservator, selected by the court, to manage your affairs, in most states. State Laws Regulating Durable Powers of Attorney You should be aware that most states recognize Durable Powers of Attorney. However, like Durable Powers of Attorney For Healthcare, the laws in each state vary. Each state has their own requirements and limitations. Some states recognize that a Durable Power of Attorney will take effect immediately upon execution. This means that you should be extremely careful before you draft this document and have it executed. Often, states will recognize a Springing Durable Power of Attorney, which has very specific limitations on the time that this Durable Power of Attorney can take effect. These may not be available in all states, but they should certainly be carefully considered. Usually these Springing Durable Powers of Attorney are created to take effect, only upon the happening of a specific event, such as incapacity. It is called "springing" because it "springs into effect" when the event(s) specified in the document have occurred. You should consult your attorney to see if this is necessary for your situation. Some Ideas For Using Durable Power of Attorney If you live in one state and own real estate in another state, you can give a person the power to act as your agent in signing any documents in the event that you wanted to sell your property. This power would be limited and can be made into a Durable Power of Attorney, so that, for example, if this property were valuable and something happened to you to render you incapacitated [and thus unable to earn a living for some time], an agent designated by you could authorize a sale of this property to raise money to pay the mortgage on your house. This forward planning could help to protect your family, and yet keep some, or most, of your estate intact, until you could earn a living again. If you have been diagnosed with Alzheimer's disease, but are not yet suffering the effects, [so long as you are still mentally competent] you might draft a Durable Power of Attorney to take effect, and to enable your designated agent to manage your affairs for you, even after you become incapacitated. Your planning and this document could serve to protect your family, preserve your assets and to keep the management of your affairs out of the courts and on a productive line. If you know that you are going to be out of touch for a time, you can give a stock broker, or other person, the authority to buy or sell stocks, options or other securities for you. Again, this power can be general or specific, but it should not be any greater than necessary to accomplish your goals. Also, you can use the type of Power of Attorney in the form of a Durable Power of Attorney, so that this agent can make these decisions regarding your financial matters, only should you become incapacitated. Benefits of a Durable Power of Attorney We have already discussed many of the benefits of a Durable Power of Attorney. Overall, this legal instrument, if properly drafted, gives you the control over the person who will manage your affairs, should you be unable to, by virtue of unexpected mental condition. Disadvantages of a Durable Power of Attorney The most glaring disadvantage of any Power of Attorney is that you are forced to trust another person to handle some or all of your financial affairs. This person can have total power and control over these affairs and is allowed, by law, to make discretionary decisions regarding these affairs. It is not uncommon for agents to abuse the powers conferred upon them and/or use these powers to benefit themselves instead of your family. To overcome this disadvantage, some people who might be considering a Durable Power of Attorney seek to appoint two agents, instead of one. However, this has obvious disadvantages also, such as what happens when the two agents disagree as to how to best serve your estate. Another legal vehicle to accomplish similar purposes is a trust of some type. There are many different trusts, and these are more fully discussed in the sections on Revocable and Irrevocable Living Trusts.
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