By Robert E. Fravel, Esq.
Without a doubt, one of the most commonly used estate planning documents is the Durable Power of Attorney. But what exactly is a Durable Power of Attorney and how does it work? Hopefully this article will clear up any questions surrounding the Durable Power of Attorney and help you decide if this is an estate planning document that would benefit your situation.
What is a Power of Attorney? A power of attorney is a document that grants legal rights and authorities from one person (called the “principal”, to another person (called the “agent” or “attorney in fact”). The agent essentially steps into the shoes of the principal and acts for him or her on financial and business matters. The agent can do whatever the principal may do – withdraw funds from bank accounts, pay bills, trade stocks, cash checks, etc. – except as provided for by the actual power of attorney document. This is not an unfettered right however. The agent must manage the finances for the benefit of the principal.
When does the Power of Attorney take effect? The power of attorney will take effect as soon as it is signed by the principal. However, a “springing” power of attorney will only take effect when the event described in the document occurs (this is usually the incapacitation of the principal).
Does the Principal lose his/her rights when he/she signs a Power of Attorney? Absolutely not. Only a court can take away your rights through a guardianship /conservatorship proceeding. A power of attorney simply gives your agent the ability to act along with the principal.
Can the Principal change his or her mind afterwards? Of course. The principal may revoke the Power of Attorney at any time by simply sending a letter to the agent expressing that their appointment as agent has been revoked. Once, the letter is received by the agent, he or she can no longer act under the authority of the Power of Attorney.
What happens if the Agent becomes incapacitated or refuses to act as Agent? I always advise my clients to name an alternate agent in their power of attorney. This is a good way to protect yourself in the event that your agent becomes incapacitated or no longer wishes to bear the responsibility of being your agent. If this happens, the principal’s alternate agent would step in and assume the rights and responsibilities provided for by the instrument.
A Durable Power of Attorney can be a very useful and powerful tool for the estate plan. However, you should sit down with an experienced estate planning attorney to discuss whether or not having this instrument will benefit your individual situation.