Durable Powers of Attorney. The purpose of a Durable Power of Attorney (DPOA) is to give authority to someone else to act on your behalf if they were you. The person who holds a DPOA for all intents and purposes stands in your shoes and acts as your agent. For example, a person holding a DPOA can write a check and sign his name to draw funds from your bank account. This same person can also sell or purchase property on your behalf, including your home. Simply, this person can do any of the things that you can do. This ability to act on your behalf is critical in any number of situations, including but not limited to, the ability to apply for benefits to pay for long term care. A durable power of attorney should not be confused with a general power of attorney. These are two very different documents with different functions despite their similar names. The general power of attorney has a serious flaw which prohibits it from functioning as a method of planning for incapacity. The law considers power of attorney to be automatically withdrawn when you lose capacity. This means that if you have a stroke or other incapacitating event the power of attorney is no longer effective. The DURABLE power of attorney differs significantly in that it continues to function despite the incapacity of the person who granted it. There are some variations to the general DPOA that you should be aware of: First you may limit the powers of the person holding the DPOA, often called the attorney in fact. You can restrict the powers to only one specific purpose, for example, to sell real property. The second common variation is to make the power of attorney effective only upon your incapacity. This "springing" power is used when you want to have the DPOA come into effect only upon your incapacity, for example, when the you want to keep absolute control due to concerns about the holder of the DPOA acting prematurely. A springing DPOA, however, presents some pragmatic problems of proving your incapacity to the third parties relying on the DPOA. This proof requirement may ultimately render your planning ineffective. Caution is advised when creating a power of attorney that "springs" to life only when you lose capacity. Your durable power of attorney should specifically describe what the attorney in fact may or may not do when acting under the DPOA. DPOA's are strictly construed, meaning that the person relying on the document will only act if the document specifically describes the specific things which the holder is allowed to do. For example, the son who holds the DPOA for his incapacitated mother goes to the bank to retrieve items in the safety deposit box. The particular DPOA he is using does not say that he can open his mother's safety deposit box, so the bank refuses to allow him to open the box. There is no mechanism other than compelling the bank through a civil action in court to open the box. Even then, such action may not meet with success because of the strict adherence to the language of the document. Can you cancel or revoke a DPOA? Absolutely yes. However, since it is so easily revoked a problem arises in which the person relying on the DPOA may reject it due to how old it is or some other reason which they may think likely to have caused the DPOA to be revoked. Careful drafting of the document can alleviate this problem to a great extent, including limiting the time that a DPOA is effective or providing for a detailed mechanism for revocation of the power. When choosing the person who is going to hold the power granted in a DPOA the first criteria is who do you trust. A close family member is usually the first choice. Second criteria is geographic location. Close proximity to the grantor is an important consideration. The ability to determine first hand the client's wishes and access to documents and institutions makes for a more effective, practical, utilization of the grant of authority. A client at one of my seminars once asked, "I have a Power of Attorney that I bought at the office supply store. Isn't this good enough? " Remember, if it is only a "power of attorney" it will not function should you lose your capacity. Indeed, a power of attorney often lulls a client into a false sense of protection when in fact a "power of attorney" loses any effect when the principal loses capacity. A power of attorney to be effective in planning for incapacity must have language which creates a durable power of attorney. Not all powers of attorney are durable. The specific language required must say that the grant of authority shall survive the subsequent incapacity of the principal. Without such language the power of attorney is useless if the principal loses capacity. Again, caution is advised in the use of "store bought" legal forms. Terminology. Advanced Directive - A general term for all methods of planning for incapacity including Durable Power of Attorney and Health Care Surrogate. Attorney in fact - The person whm you grant the authority to act in your place, also referred to as a proxy. Springing power - Authority which springs into existence on the occurrence of a specified event e.g. incapacity. Durable - Means that the grant of authority (the DPOA) survives your incapacity. Must be expressly indicated within the document. DPOA - Durable Power Of Attorney. Principal- Person executing the power of attorney. Capacity- Refers to an individual's ability to understand who they are, who their heirs are, the status of their assets, and the impact of the documents being executed on those assets, Drawbacks of a DPOA. The major drawback of a DPOA is the potential for abuse. While there are laws in place to impose criminal as well as civil penalties for the wrongful use of a DPOA, practical realities of proving such wrongdoings place a great importance on selecting a trusted individual to serve as your attorney in fact. The solution to the problem where there is no ONE person to be completely trusted with control over your assets is to name a co-attorney in fact and require that all actions taken under your grant of authority be made only with the consent of the other. This allows the left hand to watch over the right so to speak. Obviously this does not completely solve the problem in that both the proxies may get together and agree to abuse the grant of authority. The use of co-attorneys in fact should not be used in every case as it creates another set of logistical complications by requiring two signatures on every document. The second major drawback is the reluctance of some financial institutions and other third parties to rely on the document as a valid grant of authority. You may find yourself in a predicament where your attorney in fact goes to act and a bank refuses to respond to his demands. In such a case a letter from the attorney who drafted the DPOA may remove some reluctance on part of the third party, but not always. Careful drafting of the DPOA is often the best way to increase the effectiveness of the DPOA. The powers that I include also contain a provision that requires the affirmative action of the principal to record in the county of their residence any revocation of the DPOA. Therefore, should anyone question if the power has been revoked they simply have to look to the public record. I also include an indemnification clause which means that you are assuring the third party you won't sue them if they do what your power of attorney requests. An additional problem, easily overcome, is the problem of staleness of the Durable Power. In every power of attorney there is the possibility the that grant has been revoked or the client has died. For this reason a built in problem is one of how much time has elapsed since the creation of the document. As a general rule, you should re-execute the document at least once every three years. The best way to plan for incapacity. While a DPOA is often effective in managing the affairs of the incapacitated client. The best approach with the most security, safeguards and reliability is to use a Revocable Living Trust in combination with a DPOA. The DPOA in this case only functions to control assets that are inadvertently left out of the trust estate. With a Living Trust you retain control over the assets as trustee of the trust without granting authority to anyone else until an incapacitating event happens. When you can no longer can serve as trustee because you have lost the capacity to do so, then the successor trustee who you have named steps into your trustee shoes and manages the assets. Financial institutions can not refuse the successor trustees directions. There is no issue of revocation or staleness as in the case of a DPOA. Beneficiaries of the trust usually have the right to monitor the management of the trust and require the successor trustee to account for his actions, further providing protection against potential abuse. Lastly, the Living Trust has the major advantage in that is solves two problems at once, one, the problem of managing your assets while you are alive but unable due to some incapacity and two, manages your assets and disposes of them pursuant to your direction after your death avoiding the probate process in the process. The Living Trust. The functioning of a trust is quite simple and can be analogized to the concept of a corporation. Like a corporation a trust is an entity that exist as a fictitious person. It is brought into existence in much the same way as a corporation but instead of articles of incorporation describing the creation and operation of the entity, a trust is created by executing an agreement between the person who creates the trust and the person responsible for the administration of the trust. This document is called a trust agreement and contains the directions to the trustee as to how he is to act under certain conditions. The two conditions which we are concerned with are incapacity of the initial trustee/grantor and the distribution of the estate after death of the initial beneficiary. In the typical situation the initial trustee and the initial beneficiary are the same person as the person who created the trust. This is where it gets a little confusing, in other words, a trust is simply an agreement to manage the property of the trust between you and yourself for the benefit of yourself. The trust agreement document contains within it directions as to who is to step into the shoes of the initial trustee in the event of incapacity and what the "successor" trustee is to do in that event, thus avoiding having a guardian appointed. THE IMPORTANT THING to remember is that the successor trustee only can control the assets that have been transferred to the trusts ownership. The successor trustee has no ability to manage that property which is still owned in the individual's name. In other words, simply having a trust does not avoid the probate system or plan for incapacity. You must fund the trust with your property before you loose capacity or die. The living trust is a simple, elegant solution for the majority of clients to dispose of their estate and to set in place a plan in case of incapacity

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