Durable powers of attorney are an essential ingredient in a
complete estate plan. The advantages to having a durable power of attorney include: empowering an agent to establish a revocable trust; avoiding the need for a court-supervised conservatorship; and assisting in personal
care decisions for elderly or disabled individuals. When a durable power of attorney is in place, an
attorney in fact manages one’s financial decisions in the event of incapacity. The level of control given to the attorney
in fact varies with the principal’s comfort, and the particular needs of his asset situation.
Why would I Need
One now?
The
effectiveness of durable powers of attorney stems from the law of agency. Under agency law principals, an individual with
capacity may give an agent powers—to contract, to make representations, and to revoke or amend a trust, for instance.
In the case of a non-durable power, the agency terminates upon the principal’s incapacity. Durable powers survive incapacity,
but the principal must have capacity at the time of execution in order to effect a valid execution.
Accordingly, executing a durable power of attorney for financial management should
be done prior to incapacity. Waiting until one becomes unable to coherently express one’s wishes with regards to financial
management decisions is too late, and a court-appointed conservatorship is likely necessary. What about the successor trustee
designated in my trust, or the executor of my will? Would they be able to step in? Since the principal is still living, only
incapacitated, only an attorney in fact designated under a properly executed power of attorney may step in to make life-time
financial management decisions. Would a court of law not possibly be able to conclude that the principal had capacity to execute
a durable power of attorney? If so, it’s unlikely that it would be respected, however expensive or damaging the result.
What
powers should the Attorney-in-Fact be given?
The
powers given to an attorney in fact depend upon the principal’s desires and the particular concerns that stem from the
types of assets held. The durable power of attorney should be coordinated with the will, trust and advance health care directive
to ensure that they do not contradict each other. Namely, should the attorney in fact have the power to create trusts? To
rescind or amend existing trusts? Should the attorney in fact have a power to make gifts to himself or to others? These powers
can help ensure that preparation for long term care (Medical) or tax planning can take place even after incapacity.
Before executing a power of attorney, individuals should be
fully informed of the powers that they are granting, and the possible consequences of such sweeping grants of power. In all
cases, it’s best to consult with an attorney who can advise on specific risks.
Our Menlo Park Estate Planning Lawyer can guide you through the process of tailoring a durable power of attorney that is coordinated with your overall estate planning
strategy.
