Three Lessons on Durable Powers of Attorney

Durable powers of attorney are an essential element in a succession plan complete, allowing a continuous financial incapacity. Under a durable power of Attorney, an attorney in fact makes financial decisions on behalf of the principal. In fact, the Attorney General may administer large and broad powers. Conversely, the powers granted by a durable power of attorney may be limited to specific assets or powers. Accordingly, the level of control in fact given the Attorney General should reflect the specific requirements of the estate and comfort of the principal with a general grant of authority. In this article, the author taught three lessons on effective execution and implementation of lasting powers of attorney.

First lesson: why so I need one now?

The legality of lasting powers of Attorney arising from the Statute of the Agency. Principles of agency law, an individual whose capacity can give an officer powers - to contract, to represent the principal or to revoke or amend a trust, for example. In the case of a non-sustainable power, the Agency ends on the inability of the principal. Sustainable powers survive failure, but the principal must have the ability at run time to perform a valid authority.   Therefore, the execution of a durable power of Attorney for financial management must be performed before a failure.

To wait until it becomes unable to consistently express its wishes with respect to financial management decisions is too late, and a same court-appointed may be necessary. What the trustee successor named in my trust, or the executor of my will? They would be able to intervene? Since the principal does not die of incapacity, only an attorney in fact designated under a properly executed proxy may intervene to make decisions of financial management. Last minute sustainable of power of attorney executed in disability would not survive a challenge judicial, however dear or damage the result.

The second lesson: consider making immediately effective power

Often, imprudent estate planners will execute "durable powers of Attorney, sees" which will become effective on the inability of the principal. Incapacity is determined according to a test in the power, as a decision made by a physician or a given court decision. But who wants to go through the expense, difficulty and uncertainty to initiate legal proceedings to determine disability? One of the objectives of estate is not planning to avoid delays and unnecessary costs? In addition, doctors frequently not hesitate to make decisions for incapacitated due to the liability that they may face.

In most cases, a better strategy would be to run an immediately effective durable power of Attorney, which gives an attorney in fact the power to make decisions on behalf of the principal without any finding of incapacity. Many fear an immediately effective proxy, reasoning that no one should receive such power over their financial affairs unless they are completely incompetent. If they in fact have such a lack of confidence for the Attorney General, why they are running a proxy in the first place? One would think that even more confidence would be necessary when the principal is incompetent and has little influence on the Attorney in fact. Finally, simple measures can be taken to avoid disasters before disability. Consider sealing of a copy of the durable power of Attorney in an envelope labeled "do not open until my inability." In addition to the oral instructions, this can help avoid the scenario of a runaway Attorney in fact who uses the proxy to access the financial accounts prior to disability.

Lesson 3: what powers expected the Attorney in fact be given?

The powers of a Prosecutor in fact dependent on the desires of the main and the particular concerns that stem from the types of assets held. The durable power of Attorney must be coordinated with health advance directive, trust and the will to ensure that they not contradict each other. Namely, the Prosecutor should in fact have the power to create trusts? To cancel or modify existing trusts? The Attorney General would in fact have a power to himself or others donate? These powers can help ensure that the preparation for the care of long-term (medical) or tax planning can take place even after the failure.   Before executing a power of Attorney, individuals should be fully informed powers they grant and the possible consequences of these scanning of power concessions. In all cases, it is best to consult a lawyer who can provide advice on specific risks.

Conclusion

Durable powers of attorney are one of five basic estate planning documents discussed in this article series. Unlike a will or trust, which deals primarily with the decisions taken to death, the deals with lasting power of Attorney estate planning and financial management of life issues. People should be aware of the risk waiting to run the proxy; the dangers of the "sees" powers. the range of powers which may be given to the lawyer of fact; and risks associated with a scan of the authority of the Attorney General in fact grants.   --

This article is intended to provide general information about estate planning strategies and should be relied upon as a substitute for legal advice from a qualified attorney. The Treasury regulations require a limitation of liability, to the extent that the article is, tax issues, it is not intended to be used and cannot be used by a taxpayer for the purpose of avoiding penalties that may be imposed by the Act.

John c. Martin is an estates, trust and probate lawyer in Menlo Park. For more ideas, visit its Web site: http://www.johncmartinlaw.com

Why You Need a Durable Power of Attorney Now!

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.

What Is The Durable Power Of Attorney For?

The power of attorney is a legal document that authorizes a person or organization to act on financial and business matters affairs of a person referred to as the principal. The person or organization that receives authority is called the agent or the attorney-in-fact.

The durable power of attorney is called such, since the attorney-in-fact would continue to have authority and act on behalf of the principal, even if the principal becomes incapacitated. Though the durable power of attorney has such characteristic, it is still important for the document to state that it would remain valid even if the principal becomes incapacitated or disabled.

The durable power of attorney can be useful in situations when the principal is seriously ill, disabled, and if their property is modest but do not need setting up fund trusts or guardianship. This is also favourable for married couples whose account is joined.

The durable power of attorney is also referred to as the health care power of attorney. In many situations, the health care power of attorney is different from the agent who would oversee financial and business matters. The attorney-in-fact who is given the durable power of attorney is required to make decisions related to the principal’s health like stopping life support or performing surgery.

Laws on how the power of attorney should be created are different on each state. For example, in South Carolina, the preparation for the power of attorney is the same as preparing for a will. In California, notarization in the documents is important but this may not be the case in some states. This is why it is important to have knowledge on legal matters and employ legal assistance when making the document.

A possible problem with the durable power of attorney is that the principal may not want the attorney-in-fact to take specific liberties. The principal could specify in the document what specific decisions the durable power of attorney can make. Aside from that, the document could specify that the durable power of attorney could take effect in the event the principal becomes disabled.

The durable power of attorney could cover different decisions and responsibilities, aside from health care decisions, like:

• Providing gifts which can play a major part in estate tax planning.

• Accessing safe-deposit boxes.

• Signing tax returns, IRS documents, and settling tax disputes.

• Pursuing legal matters or litigation on behalf of the principal.

• Collecting benefits from health and other insurances on behalf of the principal.

• Setting up or amending trust funds.

• Revoking the power of attorney.

Laws covering the power of attorney vary in each state. For example, if the attorney-in-fact is the spouse and they get a divorce, the power of attorney is terminated. The court may also rule the document to be invalid, especially if the principal is proven to be incompetent when the document was signed. The principal could also revoke it, as long as he is mentally sound.

The power of attorney could also be terminated if the attorney-in-fact becomes incompetent, unavailable or dies. To avoid problems, the principal could identify an alternate attorney-in-fact and state it in the document. Make sure to identify the situations when the alternate would take responsibility.

Essential Information about Durable Power of Attorney

A durable power of attorney is a practical option for an elderly who wants to plan how his or her properties, business, and other affairs will be managed when time comes he or she is mentally unable to do so. It is especially useful for people who are suffering from a debilitating health condition such as Alzheimer’s disease or are going to stay in a nursing home.

Right after you and your agent have signed the documents, the durable powers of attorney take effect until they are revoked by the principal. The document is terminated at the death of the principal. Durable powers of attorney are named that way because no additional corrections to the documents are necessary once the principal becomes mentally incapacitated. Thus, this type of powers of attorney is an enduring one since it remains in effect even if the principal is mentally incapable of making decisions for himself or herself.

Durable powers of attorney are classified into two general types: health care and financial. As the name suggests, health care durable powers of attorney authorize a person, who is called an agent or an attorney-in-fact, to make all the needed choices regarding health care and hospitalization on behalf of the principal. The decisions can be made by the agent once the principal is no longer able to do it for himself or herself. This type of durable powers of attorney takes effect when the principal has become mentally incapacitated or has a terminal disease. It grants the agent the right to decide on what to do with the principal’s remains after his or her death, as well as donate the organs for educational, scientific, or transplant purposes.

What if I have not appointed someone as an agent to oversee of my health care, you might ask. If nobody has powers of attorney to act on your behalf and you are already unconscious or mentally incapable, the courts will assign someone to make health care decisions for you.

The second type of durable powers of attorney is financial in nature. It is defined as the full legal authority given to another individual to be responsible for all your finance-related affairs, including filing income tax returns and paying the bills. The agent can even sign documents on behalf of the principal.

This agent is allowed to handle all the principal’s finances except the assets owned by the revocable living trust. Examples of assets outside the living trust include pension plans, annuities, and IRAs (individual retirement accounts). These assets are managed by the attorney-in-fact designated by the principal who owns the assets. As with a living trust, durable powers of attorney protect the privacy of the principal as well as prevent delays in financial transactions.

It pays to plan your estate before you become unable to manage things by yourself. On that note, it is important to have a durable power of attorney ready so that you can rest assured that someone you trust will manage all your finances, assets, and health care issues instead of a person appointed by the courts.