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Why You Need a Durable Power of Attorney Now!
By John Pollock
Editor's Summary: With regards to estate planning there may
be a time when you should name a power of attorney. This article is
a full discussion of what is called a durable power of attorney. Great
examples are given to demonstrate the usefulness of having delegated
a durable power of attorney. A lot of useful information is provided.
Planning for unfortunate events such as serious illness or injury is
rarely on anyone's list of favorite pastimes. Sometimes, though, enduring
the small discomfort that may accompany preparing for the unexpected
will avoid untold anguish on the part of your family and friends. This
is certainly the case with the Durable Power of Attorney, an often simple
document that becomes so very important if sickness or injury renders
you unable to take care of your own affairs.
Power of Attorney Defined
A Power of Attorney is a document in which you (as the "Principal")
allow someone else (the "Agent" or "Attorney-in-fact") to act legally
on your behalf. The Power of Attorney may be limited to very specific
actions that the Agent is authorized to take on your behalf. On the
other hand it may give the Agent very broad powers. In either event,
the Agent you appoint in the Power of Attorney should be someone that
you trust without reservation. That could be a family member, an advisor,
a trustworthy friend or a bank or similar institution.
The "Durable" Power of Attorney
The significance of having a "Durable" Power of Attorney is best understood
if you know what can happen with the plain old garden variety of Power
of Attorney.
If you sign a Power of Attorney that is not "durable," the document
remains effective only while you are alive and competent to handle
your own affairs. If you become incompetent or die, the Power of Attorney
is automatically revoked by law and your Agent is no longer able to
act on your behalf. This prevents a Power of Attorney from becoming
irrevocable inadvertently, and, until recent times, it was the only
way a Power of Attorney could be prepared.
The non-durable Power of Attorney has limited usefulness for family
and estate planning purposes, though, because the Power of Attorney
is often most needed when you have become incapacitated! That is when
you really need someone else that is able to make legal decisions or
take other actions on your behalf.
All fifty states now permit the use of a "durable" Power of Attorney
that is not revoked simply because the Principal becomes incapacitated
or mentally incompetent. This makes the Durable Power of Attorney a
far more reliable document, particularly for family and estate planning
purposes, since you may now authorize your Agent to act on your behalf
even after illness, injury or other cause has rendered you unable to
manage your own affairs. Even with a Durable Power of Attorney, however,
the Principal’s death causes an immediate revocation of the document
and termination of the powers that are given to the Agent.
A Matter of Convenience
The Durable Power of Attorney is often used as a matter of convenience.
Suppose, for example, you have your home listed for sale. You have
also planned a long awaited trip to visit Aunt Trixie in Deadwood, South
Dakota, and you are concerned that an interested buyer may come along
while you are on the road. A Durable Power of Attorney would be handy
here to appoint someone you trust to act in your absence to negotiate
the sale and sign any documents that are needed to make the deal binding.
The Durable Power of Attorney could be prepared so that it is effective
only until the date you plan to return from your trip, and it might
describe specific terms that your Agent must include in the sale, such
as the minimum sale price that is acceptable to you.
A Matter of Protecting Loved Ones
What happens if, from illness, injury or another cause, you become
physically or mentally incapacitated to the point that you are no longer
able to handle your own legal affairs?
Let’s suppose again that while you are incapacitated it becomes necessary
to mortgage your home to pay your medical bills. Who will sign the mortgage?
Even if your home is jointly owned with your spouse, he cannot obtain
a mortgage without your signature.
In those circumstances it would be necessary to request the local probate
court to appoint a guardian for you that has the power to handle your
legal affairs. In many states, this type of guardian is referred to
as a “conservator”. Included in the conservator’s powers might be the
power to borrow money and sign a mortgage on your behalf making it possible
to obtain the funds needed to pay the medical bills.
However, you may have heard that it is advantageous to avoid probate
whenever possible, particularly if there is a good alternative available.
The delay and expense associated with probate proceedings and the fact
that they are conducted in the probate court, a public forum, make that
good advice in most circumstances. And there is a better alternative
than probate, but it requires you to act before the incapacity arises
– you need to sign a Durable Power of Attorney.
When used in this estate planning context, the Durable Power of Attorney
is generally worded very broadly to give your Agent the power to step
into your legal shoes in almost any circumstance. In effect, you tell
your Agent “You can do anything I can do."
Now, if you have prepared the Durable Power of Attorney and then become
incapacitated, no one has to go through a probate proceeding to appoint
a guardian or conservator to act for you – you have already given your
Agent the power to do so. As you can see, the Durable Power of Attorney
can save precious time and expense in critical situations and avoid
having your personal affairs become the subject of a public proceeding.
Appointing a Successor Agent
It is often a good idea to appoint one or more successor Agents. The
Agent you appoint in your Durable Power of Attorney may die or for some
other reason become unable or unwilling to act as your Agent. In that
case, you may be left without someone to act for you when you most need
that assistance.
Appointing successors to your first choice of Agent helps insure that
someone is always available to handle your affairs. Of course, each
successor that you appoint should be someone that has your complete
trust.
Revoking a Power of Attorney
As long as you are competent, you have the power to revoke your Durable
Power of Attorney. To do so, send written notice to your Agent notifying
him or her that the document has been revoked. Once the Agent has notice
of your revocation, the Agent may take no further action under the Durable
Power of Attorney. However, your revocation will not undo any permissible
actions that the Agent has taken prior to being notified that the Power
of Attorney has been terminated.
You must also notify third parties with whom your Agent has been dealing
that the Durable Power of Attorney has been revoked. For example, if
the Agent has been dealing with a stockbroker, you must notify the stockbroker
as soon as possible. Do this in writing, as well, and do it immediately.
Third parties who do not receive notice of the revocation are entitled
to, and probably will, continue to rely on the Durable Power of Attorney.
Making the Durable Power of Attorney Effective upon Incapacity.
It is possible to have a Durable Power of Attorney that only becomes
effective if and when you become incapacitated. This document is referred
as a "springing" Durable Power of Attorney because it "springs to life"
on the occurrence of a future event – your incapacity. The document
should include a detailed definition of "disability" to make clear the
circumstances in which your Agent may act on your behalf.
Knowing that your Agent is unable to exercise his or her powers until
you are actually unable to do so yourself may make using the Durable
Power of Attorney more comfortable for you. Unfortunately, even with
a good definition of incapacity in the springing Durable Power of Attorney,
your Agent may find that third parties are simply not willing to make
the judgment that you are indeed disabled. If they are wrong, they may
be held liable to you for any damages that you sustain as a result of
the error in judgment. You may therefore find the springing document
cannot be relied upon in all circumstances.
Don't Procrastinate!
Estate planning is easy to put off. But don't! Advance planning,
such as executing a Durable Power of Attorney, may make a horrible circumstance
for you and your family just a bit more bearable.
John Pollock is an attorney that specializes in estate planning. He
is also the webmaster of http://www.forms-free-4-all.com,
a website offering free legal forms with easy to understand explanations
of the relevant law.
Article Source: http://EzineArticles.com/
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