While most attention in estate planning is paid to what happens after death, it is just as important as what happens during your lifetime. A durable power of attorney is an important estate planning decision that lets you give legal authority to a trusted person to handle your finances for you. Having this document in place may provide continuity in your financial management and prevent serious problems from arising. However, a durable power of attorney that is not carefully crafted can result in confusion or exploitation. If you are considering putting a durable power of attorney in place, consider contacting the California attorneys at Von Rock Law and arranging an initial consultation with an experienced estate planning lawyer. You can reach us at (866) 720-0195.
What Is a Power of Attorney?
A power of attorney is a legal arrangement in which one person gives another person the legal authority to handle their financial affairs. This document should not be mistaken for a healthcare power of attorney or medical power of attorney, which deal with medical decisions. A power of attorney is only effective during the creator’s lifetime; after death, a person’s executor named in their will would move to be appointed to act on the creator’s behalf.
What Does Durable Mean?
The term “durable” means that the powers designated within the document will continue after the creator becomes incapacitated.
Important Definitions to Understand
Some important definitions to understand related to the durable power of attorney designations in California include:
- Principal – The principal[AP1] is you, the person who executed the power of attorney.
- Attorney-in-fact – The attorney-in-fact is the person to whom you are granting powers to act on your behalf.
- Power of attorney – A power of attorney is a written instrument that grants powers to an attorney-in-fact.
- Springing power of attorney – A springing power of attorney is a power of attorney that does not become immediately effective. Instead, it becomes effective at a specified date in the future or when a specific occurrence happens, such as the principal being declared incapacitated.
- Effective date – The effective date is when the attorney-in-fact can begin acting on your behalf. This could be the date you sign the document, a specified date in the future, or a date when an event occurs, such as when you are declared incapacitated.
Benefits of Having a Durable Power of Attorney
There are several benefits of having a durable power of attorney, including the following:
- Convenience – A power of attorney can provide a convenient way for someone to have their financial affairs managed by someone else. For example, if you will be out of the country or do not have time to complete something, you can have someone else take care of it for you without you having to be present.
- Continuity – If something happens to you and you cannot communicate how to manage your financial affairs, a power of attorney can provide a plan to keep your finances under control.
- Safeguard – A durable power of attorney provides a safeguard for you in case you become incapacitated. This can help you and your family have a sense of peace in case something unexpected happens to you.
- Avoid more intrusive legal arrangements – Without a power of attorney in place, a court may have to appoint a guardian or conservator, which can be more expensive and intrusive than having your attorney-in-fact act on your behalf.
Risks of a Durable Power of Attorney
While a power of attorney can be a valuable estate planning document, it may come with certain risks, such as:
- You may hand over considerable power to someone else, including being able to sell your house, change insurance policies, and make other important decisions on your behalf.
- Your attorney-in-fact may act in ways you did not intend.
- Most power of attorney documents do not provide oversight over what your agent is doing.
- Banks and other third parties may not accept a power of attorney or may require a specific power of attorney form.
- It can be difficult to hold the attorney-in-fact accountable for wrongful conduct after broad powers have been provided to the agent.
An experienced estate planning lawyer from Von Rock Law can discuss ways to mitigate these risks.
What Can a Durable Power of Attorney Do?
A power of attorney can provide broad powers, including the right to complete:
- Real property transactions, including buying or selling your real property, entering a lease on your behalf, and authorizing repairs;
- Tangible personal property transactions, including buying or selling your property;
- Banking and other financial institution transactions, including opening bank accounts, closing bank accounts, withdrawing funds from your accounts, and paying bills out of your financial accounts;
- Stock and bond transactions, including buying, selling, and trading stocks and bonds;
- Commodity and option transactions, including buying, selling, and transferring commodities and options;
- Business operating transactions, including making decisions about how to run your business;
- Insurance and annuity transactions, including purchasing, canceling, or modifying insurance policies or annuities;
- Estate, trust, and other beneficiary transactions, including preparing documents and making changes to beneficiary designations;
- Claims and litigation, including suing or defending you against legal claims;
- Personal and family maintenance, including making decisions about how to provide for your dependents while you are incapacitated or away;
- Benefits management, including managing benefits from Social Security, Medicare, Medicaid, other governmental programs, or civil and military service (You may need certain designations and forms for some of these purposes);
- Retirement plan transactions, including opening, closing, or transferring accounts;
- Tax matters, including filing personal income tax returns on your behalf; and
- Special powers you designate.
Contact an Estate Planning Lawyer for Help
If you would like assistance incorporating a durable power of attorney into your estate planning, a lawyer from Von Rock Law can help. Our lawyers are intimately familiar with these documents and can customize a document that meets your specific needs. We can also explain how your durable power of attorney fits in with other aspects of your estate plan. Consider contacting us at (866) 720-0195 for help.
