An important part of any thorough estate plan is the preparation of a Durable Power of Attorney. This document allows someone you designate to represent you and act on your behalf to deal with financial matters, including banking, investment, real estate, gifting and other financial transactions.
It is important to have a Durable Power of Attorney in place because it will allow your agent to continue to care for your financial needs if you are unable to act for yourself. The existence of this kind of plan will avoid the time consuming and costly need for governmental intervention, the filing of an incompetency petition and the embarrassment of having a guardian or conservator appointed to handle your financial affairs.
The use of a “Durable” Power of Attorney is important because a generic Power of Attorney may automatically be revoked in the event of your incapacity. A “Durable” Power of Attorney is effective even if you are incapacitated for any reason and must be specifically drafted according to your state law in order to survive incapacity.
Your Durable Power of Attorney is effective immediately at the time you sign the document and should be stored in a safe place where it is accessible to the agent you have named to handle your financial affairs. If you are incapacitated during lifetime, whether temporarily or permanently, your agent will need access to the Durable Power of Attorney in order to take action to carry out financial obligations and transactions on your behalf.
Your agent will be considered a fiduciary and owes a fiduciary duty to you in acting under the power you have granted. This means that as a fiduciary, your agent is personally responsible to act in your best interest. He or she must act reasonably and prudently and must handle your affairs separately without commingling your funds with their own.
A Durable Power of Attorney is effective during your lifetime unless you revoke it. Upon your death, the Power of Attorney will automatically be revoked and your agent will no longer have authority to act on your behalf. If you have executed a Will or a Trust, the executor of the Will and the Trustee of the Trust will have authority to handle any necessary financial matters after your death.
You can revoke a Durable Power of Attorney at any time during your lifetime so long as you are competent and not incapacitated. In order to do this, you must provide written notice to the agent and to any others who may be relying on the Durable Power of Attorney. For example, if you have provided your bank with a Power of Attorney, in addition to notifying your agent, you must also notify the bank that the agent no longer has the authority to act on your behalf. For this reason, it is important to keep a list of who has been provided the Power of Attorney, as well as anyone who you suspect may have a copy of the document.
As with any other legal issue, it is important to discuss the implications and requirements of a Durable Power of Attorney with your attorney to ensure compliance with your estate or business succession plan and the laws of your state.