Powers of Attorney- Part 7

The Document Itself

A power of attorney is conceptually a simple document. It names someone to act on your behalf. However, this simple concept does not necessarily mean that the document will be short or concise. A one page doocument (they are out there, I have seen them) that names "John Doe as my agent under this power of attorney" and nothing more would probably not be effective. Here are some tips about what to include in your Durable Power of Attorney:

-A long list of powers for your agent. The general rule of thumb is that if a power is not specifically listed in the document, then the agent does not have that power. I therefore recommend that you err on the side of over-inclusion, as you never know which powers you will need in the future.

-A statement that the power of attorney is "durable" and that it will survive the grantor's incapacity.

-Language specifically referencing medical records, making sure to include the magic acronym, HIPPA.

-A statement about the agent's responsibility for health care.

-It is helpful to include a statement that photocopies will have the same force and effect as an original.

Powers of Attorney- Part 6

Is your Power of Attorney Fresh?

The power of attorney theme for the blog continues this week with an additional tip to ensure the effectiveness of your document. I recommend "freshening" your power of attorney every three to five years. By freshen, I mean execute a new document, even if it contains the same terms and provisions as your existing document. A power of attorney with a more recent date is less likely to be questioned when you put it to use. If you document is decades old, yellow and full of coffee rings, then a bank or financial institution might think twice about accepting it.

Powers of Attorney- Part 5

Is your Power of Attorney Durable?

I have interchangeably used the words "durable power of attorney" and "power of attorney" in previous posts. In fact, the word "durable" has a significant impact on the effectiveness of your power of attorney. A power of attorney that is durable survives the incapacity of the grantor. As a default rule, all powers of attorney terminate upon the incapacity of the grantor of that power unless the document states that it will continue during incapacity. In most cases, it is important to ensure that your power is durable, as most people want a power of attorney to protect against incapacity.

In order to determine if your power of attorney is durable, review it to see if the term "durable" is used or if there is a specific statement that the power will survive the incapacity of the grantor.

Powers of Attorney- Part 3

Today or Tomorrow?

One question to decide in preparing your power of attorney is to determine whether you want it effective immediately (sprung) or effective only in the event of incapacity (springing). As with most legal questions, there is no right or wrong answer, but rather pros and cons.

Your agent can use your sprung power of attorney the moment they need it (without taking any additional steps). This type of document is very efficient. It may also be used if the grantor of the power is simply out of town or unavailable.

Some individuals can not sleep at night knowing that there is an effective power of attorney out there. In that case, a springing power may be the best option. The downside of a springing power is that the grantor must be declared incapacitated (by a doctor or court). A grantor's doctor may be reluctant to declare his or her patient incapacitated, especially in a close case. Another variation of the springing power of attorney is to utilize a committee of friends and/or family members that must vote to determine that the power of attorney is effective.

If you have any questions about whether your power of attorney is springing or sprung, please consult your legal advisor.

Powers of Attorney- Part 2

What a Power of Attorney is Not

Many individuals are uncomfortable with giving another person power of attorney for fear of abuse or mismanagement. However, an agent serving under a power of attorney is not granted free reign to control someone's assets as they see fit. An agent has a fiduciary duty to act in the grantor's best interest. In other words, an agent can only act for the benefit of the grantor and do those things that the grantor him or herself would do. If ever there is an allegation of wrongdoing against someone who has a fiduciary duty, that person is basically guilty until they prove themself innocent.

My wife and I had an opportunity to witness the "suspect" use of a power of attorney first hand. We were enjoying dinner out of town. The waiter was delivering the bill to the party at the next table, when one of the members of that party jumped up to grab the bill, shouting "I'll pay for this one, I got Daddy's power of attorney." Normally, as an estate planner, I would have immediately jumped up and questioned this exercise of her fiduciary duty. However, this particular dinner group was most scary and I am afraid it would not have ended well for me.

Even though your agent owes you a strict fiduciary duty in the administration of your power of attorney, you should still take care in who you select to serve in that role.

Durable Powers of Attorney

A durable power of attorney can be a powerful tool in the event of a person's disabililty or incapacity. Absent a power of attorney, a family member or loved one must petition a court to administer the affairs of an individual who is legally incapacitated. This process can be lengthy, uncomfortable and expensive. A power of attorney allows an individual to appoint someone to handle their financial affairs for them (typically without court approval). The following are some tips regarding powers of attorney:

1. Ensure that your current power of attorney is "durable," which means it will survive your incapacity. A durable power of attorney should actually include the word "durable" in the document.
2. "Freshen" your current power of attorney every few years, as a bank or financial institution is more likely to accept a power of attorney with a recent date.
3. Consider allowing your banks, institutons, employer, etc. to review your power of attorney now (before someone uses it) to ensure they will accept it when it is actually needed.
4. Consider naming several successor agents under a power of attorney.

Taking the time to create a durable power of attorney can be a tremendous gift for your loved ones.