An introduction to durable power of attorneys

A durable power of attorney (or POA) is arguably the most powerful instrument that you can create and is especially important in estate planning.  A POA is a relatively insignificant and informal document that allows another individual to legally act on your behalf. 

A POA can be as powerful or long-lasting as you want although they are generally reserved for very specific occurrences and for a limited time.  The term durable is inferred in this article as the purposes are for the POA to last indefinitely unless otherwise rescinded.

By signing a POA, you give the full force of your signature and/or decision-making capacity to another person and whatever that person does under the authority of that POA carries the full weight of the law.  In other words, if you give someone a POA that allows him or her to sign a specific contract on your behalf, it is just as though you have signed the contract.

There are many reasons to create a power of attorney but for the purposes discussed here, those purposes will be limited to estate planning.  For this purpose, you must first decide what the purposes are for creating the POA, who it assigns, the extent of their power, and if there are time limitations.  Without a POA, there is nobody that can legally represent you unless a court appoints someone to do so.  In that case, you may find that person could be a relative that you don’t want or a professional who will charge the estate and doesn’t even know you.

Limited or General Power of Attorney

You may create a POA that is either “general” or “limited”.  When you create a limited POA, the power only lasts for a limited period of time or for a specific purpose.  You may create a POA that gives someone the right to pay bills on your behalf but not make medical decisions or sell off your entire stock portfolio.

A “general” POA gives more latitude than a limited POA in that it allows the person all rights that you retain for yourself.  General POAs should only be signed when you trust the person completely and know beyond any doubt that they understand and will act in your best interest and make decisions the same way you would.

Power of Attorney Effective Date

Most POAs are considered”immediately effective”.  The person whom you appoint gains this power immediately and can act on that POA starting the moment it is signed.  Unless specified otherwise, the power gained by a POA is gained immediately.  

The other option, and one that should be considered is a “springing” POA.  In other words, it is triggered by an event, and only that event will make the POA effective.  An example would be if you were incapacitated and unable to form your own rational decisions.  Only then would the POA become effective.  It is very important that the terms of the springing POA be laid out clearly including the method for determination of the incapacity and the person who decides whether you are indeed incapacitated.  

Springing POAs however, are somewhat harder to operate under.  The person who obtains the POA may be required to repeatedly obtain evidence that you are incapacitated.

You should consider executing a power of attorney but only if you have someone that you fully trust.  The other option is to nominate the person that you want to act as your guardian or conservator.  That way, the court has the capacity to watch the person that is handling your affairs and make them more accountable. 

Power of Attorney Requirements

It may sound like we’re splitting hairs here, but doing it this way makes them accountable to the court that can immediately terminate their acting capacity and hold the person criminally liable for misdeeds.  Whereas with a general POA, the person’s only accountability is to you upon your recovery or to your heirs upon your death.

Creating a POA is simple enough that it generally doesn’t require an attorney to produce the document.  It must however, contain certain elements and other elements are generally included as a protection for the person issuing the POA.  

1) As with most legal documents the POA must be dated.  This is to let other parties know that the POA is currently effective.

2) For the purposes of a limited POA, it is highly recommended that there be a termination date included in the document.  Without that termination, a POA can extend indefinitely.  The single exception to the termination provision is when the POA is a durable POA.  In this case, the only way to terminate the POA is to effectively give notice of termination.

3) The POA should also include the specific circumstances and authority of the POA.  In other words, you may be assigning a person a POA to sign a given contract or make decisions of a certain nature.  By limiting the scope of the POA, you restrict the powers to those that wish to grant.4) The POA must be witnessed.  To be on the safe side and make sure that other parties will accept a POA, it is highly recommended that you have the document notarized.

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