If you were to become incapacitated and unable to make financial decisions, who would make those decisions for you? If you haven’t executed a formal Durable Power of Attorney, in which you’ve named a trusted person to make business and day-to-day-decisions on your behalf, then you forfeit your ability to be heard on such matters should you become incapacitated. It would then be necessary to petition the Probate Court to have you declared legally incompetent and to have a Conservator appointed to make your decisions. That court process takes time, is expensive, and the judge may not choose the person you would have chosen. In addition, under a conservatorship, your representative may have to seek court permission to take planning steps that he or she could have implemented immediately under properly drafted Durable Power of Attorney.
A Power of Attorney is a written document by which you designate someone (your attorney-in-fact) to act on your behalf in financial and related matters (i.e. to sign checks, pay bills, buy and sell assets). By executing a Power of Attorney, you can select the person most appropriate to make your financial decisions, ensure that that your voice is heard and that your affairs are kept private. A Durable Power of Attorney is valuable in that it remains in effect or becomes effective if you become incapacitated or mentally incompetent. Anyone over the age of 18 years of age should contemplate appointing an attorney-in-fact. A Durable Power of Attorney is effective only during your lifetime.
A Power of Attorney may be limited (i.e., granting someone the right to sign a deed to property on a day when you are out of town or allowing someone to sign checks for you). However, in most cases, the powers granted under a Durable Power of Attorney should be comprehensive and give your attorney-in-fact all the powers and rights that you have yourself. An omission of a specific power is construed as an intent to fail to grant that specific power. Your attorney-in-fact may have to seek court permission to take planning steps that he or she could have under a broader Durable Power of Attorney.
The most common Durable Powers of Attorney grant the agent the right to act immediately. Once it is signed, the document is in full force and effect with the expectation that it will not be used unless and until you are unable to handle your own financial affairs. However, they can also be drafted to grant “springing” powers to your agent. A springing power of attorney is drafted in such a way that it becomes effective only after one or two physicians certify your inability to act of your own behalf. The primary disadvantage of the use of the springing durable power of attorney is a difficulty inducing banks or other financial institutions to accept the authority of the agent without conclusively establishing the occurrence of your disability. Many banks or other financial institutions have their own standard power of attorney forms. To avoid problems, you may want to execute such forms offered by the institutions with which you have accounts simultaneously with your Durable Power of Attorney.
Since the person selected in your Durable Power of Attorney has unsupervised access to your finances, there is potential for abuse. When considering who should be appointed, be sure to select a person you wholeheartedly trust. While spouses, children, relatives and trusted friends are obvious choices, care must be given to selecting the best person for the task. You want to appoint someone who is likely to make decisions similar to the one’s you would make on your own behalf. Your attorney-in-fact must have a competent degree of financial savvy and must also have your best interests at heart. You should also consider geographical location. Your attorney-in-fact should ideally live near you since it will be easier to handle your affairs. Ultimately, however, the question you should be asking yourself is who the best person is to discharge the responsibilities of being your attorney-in-fact, rather than simply appointing the oldest child or the closest geographically.
Oftentimes, people say that they cannot choose among the people they are considering and, therefore, wish to appoint more than one person to act as co-appointees. Although it is permissible for more than one person to share this responsibility, it is generally not a good idea to name more than one acting attorney-in-fact. Deciding who to appoint as your attorney-in-fact is not about making people feel good or avoiding hurt feelings – it’s about making sure that your wishes are carried out in a timely manner when a crisis occurs. If any disagreements erupt between the joint appointees, inaction, controversy or bitterness often ensue. And being appointed as a person’s agent is not a contest. It can be a lot of work. It can also be stressful and involve taking time off of work or away from family matters to tend to things. Finally, there are some institutions that refuse to recognize an otherwise duly executed Power of Attorney which names co-appointees. You should, however, name successor attorney-in-facts who can serve in the event the first, or even second, named individual is unable to or ceases to serve.
If for any reason you become dissatisfied with the person you have appointed to make decisions on your behalf under a Durable Power of Attorney, you may revoke the document at any time. However, there are a few steps you should take to ensure that the document is properly revoked. While any new Durable Power of Attorney usually contains language revoking a previous Power of Attorney, you should also put the revocation in writing. The revocation should include your name, a statement that you are of sound mind, and your wish to revoke the Durable Power of Attorney. You should also specify the date the original Durable Power of Attorney was executed and the person selected as your agent. Sign the document and send it to your current agent as well as any institutions or agencies that have a copy of the document. You should also enclose a copy of the new Durable Power of Attorney. You should get the old Durable Power of Attorney back from your agent. If you can’t get it back, send the agent a certified letter stating that the Durable Power of Attorney has been revoked and any authority given to them under that document is no longer valid. Because a Durable Power of Attorney is one of the most important estate planning documents available, if you revoke a Durable Power of Attorney, you should have a new one in place.
Despite the possible concern relative to the unsupervised authority of your attorney-in-fact, the Durable Power of Attorney is one of the most beneficial documents to have. When the proper person is appointed, your financial affairs can continue to be handled in the manner that you would have chosen if you were capable of doing so.
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