04 Aug What is a Durable Power of Attorney?
Whether dealing with a family member’s estate, possible future health issues or managing someone else’s financial affairs, you may have heard the term “durable power of attorney.”
What is a Durable Power of Attorney for financial and property matters (DPOA)?
A durable power of attorney is a legal document that gives another person (known as the “agent” or “attorney-in-fact”) the legal authority to act on your behalf in financial institutions or personal property matters.
The durable power of attorney can be used as soon as it is signed, or it can be set to go into effect only if you become incapacitated and unable to handle your affairs.
You can give your agent as much or as little power as you want and specify the types of financial transactions that your agent can handle.
For example, you can give your agent the authority to pay your bills, manage your bank accounts, buy or sell real estate on your behalf, or even file your taxes.
You can also give your agent the power to make gifting decisions from your assets, which can be helpful if you are trying to reduce your taxable estate.
It’s important to note that a durable power of attorney is different from a regular (or “nondurable”) power of attorney. It remains in effect if you become incapacitated. In contrast, a nondurable power of attorney is invalid if you become incapacitated.
This is one of the reasons a durable power of attorney is often used in estate planning. It can be a valuable tool for ensuring that your financial or property affairs are taken care of if you cannot do so yourself.
What are the benefits of having a DPOA in place?
There are many benefits to having a DPOA in place, even if you never become incapacitated.
For example, if you are going on an extended vacation or business trip, you can give your agent the authority to handle your finances while you’re gone.
This can be a huge relief, as it means you don’t have to worry about paying bills or other financial matters falling through the cracks while you’re away.
Another benefit is that it can help avoid court involvement if you become incapacitated.
If you do not have a durable power of attorney and then become incapacitated, your family would likely need to go to court to get someone appointed as your legal guardian or conservator.
This can be lengthy and costly, so having a durable power of attorney can save your loved ones a lot of time and money.
How can you ensure that your DPOA is durable and will continue to be effective if you become incapacitated or die?
You can do a few things to ensure that your durable power of attorney remains in effect if you become incapacitated or die.
- Be sure to choose an agent you trust implicitly and who you are confident will act in your best interests.
- Have a backup agent in case your first choice is unable or unwilling to serve.
- Keep your DPOA up to date by regularly reviewing it and making changes as needed. For example, if you move to a new state, you’ll need to update your DPOA to reflect the difference in the law.
- Communicate your wishes to your agents, so they know what you want and expect them to do on your behalf.
Taking these precautions can help ensure that your DPOA will be durable and will continue to be effective even if you become incapacitated or die.
Should my durable Power of Attorney be effective immediately, or should it be “springing power” and only effective if a doctor has written a letter saying I am incapacitated?
There is no right or wrong answer to this question, as it depends on your personal preferences and situation.
Some people prefer to have their durable power of attorney immediately, as it can provide peace of mind knowing that their financial affairs are taken care of even if something unexpected happens.
Others prefer a “springing power” durable power of attorney, which only takes effect (applicable law) if and when a doctor writes a letter that the person is incapacitated.
The advantage of a springing DPOA is that it gives you more control over when your agent can step in and take over, but the downside is that there may be a delay in your agent being able to take action if you become incapacitated.
Ultimately, whether to have an immediate or springing DPOA is up to you and should be based on what you feel comfortable with and what will work best for your specific situation.
What does the agent do?
The agent’s role is to act on your behalf by your wishes, as stated in the durable power of attorney.
This can include tasks such as paying your bills, managing your finances, helping you with your bank account matters, attending court proceedings, helping you with attorney forms and making legal documents for you such as estate planning documents, attorney documents, and other estate planning documents.
The extent of the agent’s authority will depend on what you specify in the DPOA, so it’s essential to be clear about what you want your agent to be able to do on your behalf.
It would help if you also chose an attorney agent you trust implicitly and are confident you will act in your best interests. Lastly, be sure to keep your DPOA up to date so that it accurately reflects your wishes.
Common misconceptions about DPOAs
One common misconception about DPOAs is that they are only for elderly or sick people. However, DPOAs can benefit anyone who wants to have someone else manage their affairs if they become incapacitated.
Another common misconception is that DPOAs are only used if someone becomes mentally incapacitated. DPOAs can also be used if someone becomes physically incapacitated, such as in a coma or vegetative state.
Finally, some people mistakenly believe that DPOAs give the agent too much power and control over their affairs. DPOAs can be tailored to specify precisely what the agent is and is not allowed to do, so there is no need to worry about giving away too much power.
By understanding these common misconceptions, you can be sure that you are making the best decision for your specific situation.
What should you do if your loved one becomes incapacitated and does not have a valid DPOA?
If your loved one becomes incapacitated and does not have a valid DPOA, you will need to petition the court to appoint a guardian or conservator.
This process can be lengthy and expensive, so it is always best to have a DPOA in place beforehand.
If you find yourself in this situation, you should consult an experienced professional who can help you navigate the legal process and ensure that your loved one’s best interests are represented.
Living Will vs. Durable Power of Attorney: What’s the Difference?
The main difference between a living will and a durable power of attorney for “financial and property matters” is that a living will only take effect if you become incapacitated. In contrast, a durable power of attorney can take effect immediately or at some point in the future.
Another key difference is that a living will only cover healthcare decisions, while a durable power of attorney can also cover financial and legal decisions.
A living will is typically less expensive and time-consuming to create than a durable power of attorney.
A durable power of attorney can be a valuable tool for anyone who wants to ensure that their affairs are managed if they become incapacitated. By understanding how DPOAs work and what they can do for you, you can be sure that you are making the best decision for your specific situation.
Reach out to us at Guideway Legal if we can help! https://guidewaylegal.com/living-trusts-wills/