In fact, a durable power of attorney is an essential estate planning tool. It is a legal document, in which you assign authority to an agent or the attorney-in-fact to act on your behalf. The word ‘’durable’’ hints that this document stays in effect when you become incapacitated. Thus, you don’t have to worry, if you face incapacity, as your agent can deal with your financial issues. In this way, you can prevent the financial loss. This legal document terminates in case of a person’s death. It’s important to note that you can cancel it whenever you want. That’s to say, you can specify the exact time.
A durable power of attorney offers a plenty of advantages. Flexibility is among the most vital ones. You have the opportunity of limiting the authority of agent/attorney-in-fact in the document. So, you can give this person as much power over your property as you need.
With the help of this document, you can appoint an attorney-in-fact who is responsible for controlling your business or personal issues. According to the law, he/she must act as your fiduciary. However, you should keep in mind that it isn’t easy to take the attorney-in-fact to court. Don’t forget that this person has a chance to do in effect whatever he/she wants with your financial means. That’s why make sure that you have appointed someone who is indeed trustworthy. Mainly, the attorney-in-fact is your spouse or child. If you want to learn more about a durable power of attorney, go on reading this article.
Benefits of durable power of attorney
Actually, signing a durable power of attorney offers a lot of benefits. First of all, it’s a good way of avoiding guardianship or conservatorship proceedings, which usually occur in the probate court of California.
What will happen if a person doesn’t have this legal document and becomes incapacitated? In this situation, your family members or other close people usually turn to a judge to name a person who will manage your financial issues. In the state of California, this person is known as a conservator.
Both conservatorship and guardianship proceedings cost a lot of money and are quite unpleasant. Probate court proceedings are a matter of public airing. Thus, relatives start fighting for becoming a conservator or guardian. This is indeed a disagreeable process.
Responsibilities of the agent
With the help of the durable power of attorney, you can legally authorize another person to act on your behalf. This person is the attorney-in-fact or agent. You are the one to decide exactly how much power you want to give him/her. The responsibilities of the attorney-in-fact may include filing and paying taxes, investing your money in stocks, as well as managing your retirement, collecting Social Security, etc.
Appointing more than one agent
You are probably wondering, ‘’Can I appoint more than one agent?’’ Well, the answer to your question is ‘’yes.’’ According to the law, you can take this step. You have the opportunity of naming co-agents or successive agents. Co-agents refer to two individuals who have equal rights, while in case of successive agents a second individual serves when the first one is no longer able to do it. It is also true that appointing more than one agent may become the cause of many problems and conflicts. For instance, your agents may have different opinions about carrying out your wishes.
Revoking a durable power of attorney
As a matter of fact, it’s possible to revoke a durable power of attorney. You can do it as long as you have the capacity. You should keep in mind that the revocation process should be done in writing. In addition to that, you should deliver it both to your agent and third parties with whom the agent is dealing with.
Choosing the agent or attorney-in-fact
Choosing a person who will become your attorney-in-fact is not an easy task. It requires a thorough consideration. Although this is a personal decision, there are certain factors that you need to take into account to make a wise decision. Here they are trust, location, and capability.
Among the factors, trust is an essential one, as your attorney-in-fact will make many vital decisions. For example, he/she will have to decide whether your family house should be sold or rented. You should select the person who is reliable and enjoys your respect. Furthermore, this individual should have the capability of making responsible and reasonable decisions concerning your finances and health. The location is also on the list of vital factors, as living in the same city makes it easier to pay bills, visit banks or meet with doctors or nurses, etc.
Well, in this case, your spouse also has a certain power over the property, which both of you own. This means that he/she may have the authority of paying bills using a joint bank account. Also, your couple may have the power of selling stock in a joint brokerage account. However, when it comes to selling the property that you own together, there are some limitations. In California, if you want to sell the property, which is co-owned, both spouses must approve this decision. If one of the spouses is physically unable to allow the property sale, the other one can do nothing in this situation. If you own the property alone, you spouse lacks any legal power. Thus, a durable power of attorney is necessary, if you want to give him/her certain authorities.
Having a living trust
Actually, a living trust cannot serve as a substitute for the durable power of attorney when it comes to property management. However, it is quite effective when a person is unable to handle his/her financial issues. The person who is distributing trust property after your death is the successor trustee. Mostly the successor trustee has the power of taking the responsibility of managing the trust property. This happens when the person becomes incapacitated.
You should also know that the successor trustee possesses no power over the property, which isn’t held in the trust. There are many people who prefer not to transfer all their property to a living trust. That’s to say, they are transferring to their trustees only assets, which are pricey to probate. Among these assets are a house or other real estate, valuable securities, etc.
Different types of attorney power
General power of attorney
A general power of attorney is a legal document, which lets your agent manage your affairs when you aren’t able to do it. For instance, you can use a general power of attorney if you travel abroad or cannot manage your business or personal affairs. It is frequently a part of the estate plan. As a matter of fact, the agent’s powers include purchasing and selling a property, managing banking transactions, filing tax returns, settling claims, entering into contracts, etc. Here is a list of optional powers that you can give to your attorney-in-fact: making gifts, maintaining business interests, etc.
Limited power of attorney
The peculiarity of a limited (or special) power of attorney is that you give your agent the power to act on your behalf only in specific situations. For instance, you can use this legal document, when you don’t have the opportunity of managing your affairs because you are traveling abroad. Let’s refer to several examples of common special powers. This list includes making financial decisions, handling business interests, entering safety deposit boxes, collecting debts, selling personal property, etc.
Health care power of attorney
What is a health care power of attorney? It is a legal document, which gives your agent the authority to make decisions concerning health care. That’s to say, he/she acts on your behalf when you are physically or mentally not able to do it. However, having a health care power of attorney doesn’t mean that you cannot give medical directions to your doctors if you have the physical ability to take this step. The document becomes effective if you lack this capacity.
This is how mental competence is determined. You have the right to name a doctor, who will make this determination. Moreover, you can also demand that two licensed physicians agree on your mental capacity. It is true that the majority of the organizations will not let your attorney-in-fact act on your behalf if there is no confirmation from the doctor.
It’s also essential for you to understand the difference between a living will and a healthcare power of attorney. With a living will, your doctor knows exactly what kind of medications you need, however, it doesn’t give anyone the power to make any decisions for you. There are some people who think it’s a good idea to have both a living will and a health care power of attorney as well. Here is what you should always keep in mind. Don’t forget about keeping the original power of attorney for health. Additionally, consider giving a copy of the document to your attorney-in-fact, as well as sending the copies to your doctor and a health insurance company.
We hope that now you now have a clear understanding of the durable power of attorney. It is indeed a useful tool for managing financial and personal matters. If you would like to get more on this, you can call us at (818)553-1000 to schedule your free first consultation.