quick index: Durable Power of Attorney | Springing Power | Directing Healthcare

"General" Power of Attorney

A "power of attorney" (POA) is simply a written statement which transfers control of property to another person. It is a powerful legal tool. For example, if you are leaving town and need to sell your car, you could give someone a limited power of attorney to sell your car. Or, if you wanted to, you could give someone power of attorney over all of your property. This would be a "general" power of attorney.

Is it useful in Estate Planning?

At first glance, a general power of attorney might seem like it could be the perfect estate planning tool. It would seem that it could even replace the need for a Will and Revocable Living Trust. However, there are three limitations to the Power of Attorney:

• A Power of Attorney does not continue once the principal dies. The law says that if the principal is dead, the power of attorney is no longer valid.
• A Power of Attorney usually becomes void when the principal becomes incompetent. I said usually because there is a provision (below) about the newer Durable Power designation that circumvents this limitation.
• The agent is not controlled by the strong "fiduciary relationship" which controls a trustee. The agent has full power to do whatever he or she wants to do with your property whether or not it is in your best interest. With other estate planning tools such as a trust, the trustee must perform those acts which are in your best interest.

The Durable Power of Attorney

A special type of power of attorney called a Durable Power of Attorney has been created by fairly recent laws. The Durable Power of Attorney allows for someone you appoint to manage your daily affairs when you are incapable of doing so. This special type of power of attorney has now been validated by laws in every state. The Durable Power of Attorney endures the incompetency of the principal, and the agent has power to act even though you become incompetent. In addition to managing your property, the agent is also given the power to act on your behalf with the electric company, gas company, your credit card company, and any other companies that you do business with.

Is a Durable Power of Attorney Form needed if I'm married?

Some mistakenly believe that being married eliminates the need for this type of document. The thinking goes that if you are incapable of making decisions for yourself, then your spouse would be be able to make all of your decisions. To some extent that is true. But there are many situations where a spouse is not able to deal with the red-tape unless they have the written power to do so. Credit card companies, utility companies, and even the medical community may not deal with your spouse unless they have some legal authority backing them. The Durable Power of Attorney will give this to them.

There may also be circumstances of remarraige, or alternative lifestyles where a spouse is not the primary person you'd like making the decisions for you. In these cases, the durable power of attorney is even more important.

Choosing Your Agent

Choosing who will represent you may be very easy for some people, and very hard for others. In general, if you have to think twice about your decision as far as giving over total control of your life and finances, then using a POA may not be for you. It is also possible to assign someone besides your family to act as your agent (such as a bank, lawyer, or other outside party). In these cases, you should first negotiate their compensation (if any) that they would receive should they be forced to act on your behalf.

Either way, your POA form should spell out your desired succession of appointed agents in case one or more is either away, deceased, or decides not to accept the reponsibility of becoming your agent.

Durable Power of Attorney for Health Care

Besides directing how your property is managed, a Health Care Durable Power of Attorney can now be used to manage your health care. Either as a separate document, or as part of your main Durable Power of Attorney, your Durable Power of Attorney for Health Care appoints power to your agent for medical decisions while you are incompetent. Unlike the Living Will (which spells out certain decisions for when your death is certain), the Medical Power of Attorney gives your agent the ability to make decisions about your medical treatment. Your agent has the legal right to see all of your medical records, hire and fire doctors, move you to a different hospital, and do all of the other things that it would be impossible to do without the legal backing of the durable power of attorney for health care.

I have come to the conclusion that you really do need someone to direct your medical treatment when you are incompetent. The level of medical care is substantially better when a third party is there watching and actively representing your interests. Sick people cannot physically or mentally direct their own medical treatment. They need help. Having someone else there watching could be the difference between life and death.

In no way does your Durable Power of Attorney replace the need for a Will, Living Will, or a Revocable Living Trust, but has a strong place in your legal arsenal.

Springing Power of Attorney

A good Durable Power of Attorney should "spring" into action under certain conditions defined by you. It shouldn't have to wait until you are declared incompetent by the court. The lawyers call this transition of power a "springing power".

Usually you will want to make the Durable Power of Attorney spring into action when two physicians sign a form stating you are incompetent. This is much quicker and easier than going to court and getting a court order.

Given this power prior to your death, your agent can make critical decisions about your property. In fact, your durable power of attorney could authorize the agent to transfer ownership of your property to your revocable living trust. Ideally, all such transactions should have already in place prior to your illness, but if not, the details could be finished up in order to avoid probate for your family.

Main Purposes of Durable Power of Attorney

Here are some of the main purposes for a durable power of attorney document:

Managing non-trust property

If you have set up a Revocable Living Trust, then one role of the Durable Power of Attorney is to take care of property not in the Trust if (and only if) you become incompetent. If you didn't have a trust, then the durable POA could give your agent the power to deal with all of your property should you become incompetent.

Dealing with "Third Parties"

It also gives the agent power to act on your behalf with such entities as your credit card company, your gas company, your electric company, and other companies that you do business with. Have you ever tried to deal with a utility company on someone else's behalf (even your spouse)? It is almost impossible without a Power of Attorney.

Directing Your Healthcare

Finally, in most states, a durable power of attorney for healthcare can be used to make critical medical treatment decisions for you while you cannot make them for yourself. Although the Living Will which can let you die with dignity and tells doctors to unplug the machines, it only directs medical decisions when death is certain. You need an objective person making your medical decisions when you are unable to do so...and they need the legal power so the doctors are obligated to listen to them. Your Durable Power of Attorney for Healthcare gives the agent of your choice that power.

Preventing the Terri Schiavo Tragedy

"If Terri Schiavo had prepared a living will or given someone her durable power of attorney for medical issues, there would be no debate about her future. She could have said she didn't want to live as she is now, or let those around her know she wanted every possible step taken to prolong her life. Preparing a living will and durable power of attorney for medical issues are essential tasks for anyone who wants more control over health care and end-of-life issues."

More Information on Durable Power of Attorney and other Estate Planning Tools

We will be posting more information and resources about estate planning tools such as the Durable Power of attorney here later. If you would like more information, please email us at info@power-of-attorney.info.

Lee R. Phillips is an Estate Planning and Asset Protection attorney. He has spent his career creating easy to understand estate planning and asset protection tools for the general public. He specializes in the Do-It-Yourself (DIY) advantages of estate planning, believing that an individual taking a more active role in their own planning will result in a better overall estate plan that just paying an attorney to do it.

His web site, DIY Estate Planning, provides additional information about estate planning tools including Revocable Living Trusts, Power of Attorney, Living Wills, and Testamentary Wills. He also offers a Free Estate Planning DVD from his site.

Information courtesy of estate planning attorney Lee R. Phillips