What is a Durable Power of Attorney?
A Durable Power of Attorney is a legal document that authorizes one person to act on behalf of another person in financial and legal matters. It is called “Durable” because it remains valid after the person granting the power has lost his or her mental capacity; this is when a Power of Attorney is most often needed. The person who is given the power is called an Attorney-In-Fact.
A Durable Power of Attorney is not the same as a Health Care Surrogate. The person making financial decisions for you does not have to be the same person who handles your medical decisions.
Why do I need a Durable Power of Attorney?
A Durable Power of Attorney is often the most important legal document a person can have. It allows another person to handle your banking, other financial and legal affairs. If you do not have a valid Power of Attorney and lose mental capacity or are physically incapacitated for an extended period of time, your family will be forced to obtain a Guardianship over you, a complex and often unpleasant process.
Some Powers of Attorney become effective only when the person granting the power becomes incompetent. This is called a Springing Power of Attorney. While this sounds good in theory, it is very restricting in practice. To trigger a Springing Power of Attorney, one or more physicians must declare the person mentally disabled. In cases of cognitive decline, typical of a dementia or Alzheimer’s patient, it is difficult to state exactly when a person is disabled. This is especially true because persons with these conditions have good days and bad days. Except in extreme cases, physicians are loathe to declare a person incompetent for fear of liability, and thus are reluctant to sign a statement declaring the person disabled. Absent the doctor’s signature, the Springing Power of Attorney is worthless. We do not write Springing Powers of Attorney.
Unlike most Durable Powers of Attorney that sit in a drawer, ours are used regularly because of the advanced ages of our clients. Our Durable Powers of Attorney take into consideration many possible needed usages, such as: Medicaid planning; estate planning; divorce; retain the right to sue if necessary; and many other powers. Our Durable Powers of Attorney typically run about 8 pages. We have almost all of our Durable Powers of Attorney recorded in the deed room of the county in which the signer has real estate. This is a necessary step in case the Attorney-In-Fact needs to handle real estate. Title insurance companies will not insure property that has been sold by an Attorney-In-Fact where the original Power of Attorney has not been recorded in the deed room. By recording the document immediately we avoid the problem where real estate cannot be transferred because the family has lost the original Power of Attorney.
When you select your Attorney-In-Fact, you need to select someone you trust completely. It need not be a relative; it need not be your oldest child; the person does not need to live in Kentucky. But it should be a very honest person, someone in whom you have complete trust.
If you change your mind, you can always revoke your Durable Power of Attorney. Only one person should be appointed as your Attorney-In-Fact. Appointing multiple people might cause problems; some financial institutions require that all of the folks named as Power of Attorney be present to make a decision, even of the document clearly states Jane or John. Therefore, instead of appointing Jane and John, appoint Jane, if living or willing to serve; if not, John as the alternate.
Many people name an adult child as their Attorney-in-Fact. Due to the advanced ages of many of our clients, these children are not youngsters themselves. Therefore, we strive to name one or more alternate Attorneys-in-Fact. If the Power of Attorney only names a primary Attorney-in-Fact, and that person is themselves disabled, dead, unable or unwilling to serve, all that remains is a useless piece of paper.
Our Powers of Attorney also contain many other sections that are often absent in documents generated by tax oriented estate planning attorneys. For example, if the Power of Attorney will eventually be used for Medicaid planning, specific language stripped of tax modifiers and limitations must be included, granting such authority. If a Nursing Home resident has advanced dementia and has not signed a Power of Attorney, Medicaid Planning may not be possible, especially if there is no spouse.
A Durable Power of Attorney is needed by every adult over the age of 18. You never know when that meteorite is coming down to hit you on the head! Since you cannot know when a Durable Power of Attorney will be needed, taking the attitude that “I will sign it when I need it” does not work. You should have one now.
If you have questions or would like to schedule a free consultation with us at our Louisville office, please feel free to contact us, we’re here to help.
