Powers of attorney are sometimes confusing, mostly because there seem to be so many different names and purposes. Each state has its own laws on how they’re defined and administered. This week, we explore the durable power of attorney – what it does, what it does not do and who it benefits.
Durable Power of Attorney for Property
This is one of the more common powers of attorney. It allows the principal (you) to transfer authority to someone else that you trust, known as the agent or attorney-in-fact, to make decisions on your behalf. This person can make both legal and financial decisions and can also make transactions on your behalf. The word “durable” simply means that it remains in place should you become incompetent.
Don’t let the term “attorney-in-fact” confuse you; this person can be anyone you trust, whether you are related to that person or not. Some people prefer to not name a family member and in those instances, you’ll want to speak with your attorney for any recommendations he may have. There are nonprofit agencies that can step up to the plate and fill that role. You may wish to name a second person as a backup should your first choice no longer be able to fulfill his or her duties.
Your durable power of attorney is designed to be versatile so that you can customize it to your personal preferences. For instance, you can make it as broad as extending the power to buy property or stocks in your name or can you limit the decision making to just cover your monthly expenses.
Pros and Cons of Durable Power of Attorney
There are both advantages and disadvantages to these legal documents. They’re easy to use and put into place, they’re inexpensive and of course, they’re versatile. Defining the parameters is easy, many people find the challenge in determining how much leeway to provide their power of attorney. Remember that it covers both financial and legal decisions, so you have a lot to consider. Also, a durable power of attorney differs from a joint bank account. While many add a second person to their banking accounts, that typically means that person has been granted legal access to use the funds in the accounts for his or her own personal use while a durable power of attorney can only use your assets for your benefit.
Another difference between a durable power of attorney and a joint bank account is you retain the right to remove your attorney-in-fact without a lot of red tape. Further, at the time of your death, the durable power of attorney becomes invalid while your joint bank account remains in place until the second person dies or closes out the account. He or she may also withdraw all of the funds at any time – in fact, full ownership transfers to that person when you die, regardless of what your will states.
Perhaps the biggest disadvantage of a durable power of attorney is the absence of court supervision. Remember, a conservatorship or guardianship is required to provide consistent and ongoing accounting to the court, whereas that stipulation is not part of a power of attorney. There are no checks and balances in place to ensure ethical actions. That said, unlike the conservatorship or guardianship, you have full and complete decision making process should you decide to remove your durable power of attorney.
Creating a Durable Power of Attorney in Beverly
While this isn’t a full overview of the durable power of attorney, it should provide a bit of insight that allows you in your own decision making efforts. Be sure to consult your estate planning or elder law attorney for more detailed information based on your circumstances.