The Durable Power of Attorney for Asset Management (DPOA): 13 Lucky Questions Answered

Thursday, October 14, 2010

An essential part of any complete estate plan, whether it is for a very large or very small estate, is a Durable Power of Attorney.

The following are 13 commonly asked questions and brief answers about Durable Powers of Attorney, or DPOA for short. They are also called Powers of Attorney for Asset Management, to differentiate from powers of attorney for health care (previous FFBLaw post). For more information, please feel free to call Farrell, Fraulob & Brown at (916) 442-5835, and one of our estate planning attorneys will be happy to discuss your questions and concerns.

This post is adapted with acknowledgement and thanks to Consumer Affairs. You may access their article by clicking here:

http://www.consumera … sumerism/POA_4.htm#1

1) How is a “durable” POA different from other kinds?
A “durable” power of attorney (DPOA) gives your agent broad powers and remains in force even if you become incapacitated. A “general” or “regular” POA can contain many powers, but expires if you become disabled. Special or limited POAs are most often used in a specific situation. Say your mother, who’s too old for the Magic Kingdom, wants to sell her Orlando home and move to an oceanfront condo. You are co-owner of the house, but can’t attend the closing. Cousin Chad in Fort Lauderdale, via a POA, can sign papers on your behalf.

2) When should I make a durable POA?
D.C. attorney Cindy Lynn Wofford of Ravdin & Wofford, P.C. who specializes in estate planning, points out that “It’s never too early for an adult to execute a health care power of attorney. Accidents and serious illness can happen at any age.” Married people assume that their spouse can handle things, but even if you and your spouse own assets jointly, he or she won’t have power over anything that belongs to you alone, so it’s important to make your spouse your agent.

3) Who’s entitled to rely on my durable POA?
For your financial POA, banks, brokerage firms, credit card companies, and anyone else you regularly carry on business with should get a copy. One warning: most banks and other financial institutions have their own DPOA forms, and may be wary of a “generic” one, so ask if yours will be honored. Give copies of your health-care DPOA to your doctor, your agent and close family members. “Don’t just put it in a drawer,” warns Mercer Univ. Law Professor Adam Milani, “you want the hospital or other treatment center to know about and honor your DPOA.”

4) How does my agent assume power?
You decide — it can be effective immediately or in the future. Suppose you state that your attorney-in-fact will step in if you become “incapacitated.” You can name two doctors who must agree that you are no longer capable. This is sometimes called a “springing” or “contingent” POA. A doctor or your attorney-in-fact can make this decision. Obviously, he or she must be someone you know well and trust.

5) What are some important powers to include in my financial DPOA?
Any powers authorized by your state law that you think will be needed to handle your personal or business finances. Two powers often overlooked are 1) the power to deal with the IRS and 2) the power to give gifts, which could reduce taxes on a substantial estate.

6) Is one DPOA good for the rest of my life?
Technically, it’s good until death unless revoked. Review your document every five years or so to make sure your needs and wishes are still the same. If you have a major life change, such as divorce, remarriage, or a move to another state, think about revising it.

7) What are some “human” problems associated with these pieces of paper?
Few people enjoy being out of control at any age. So if an older friend or relative who’s still functional signs a POA, he or she may keep a hawk eye on things. Attorney Cindy Lynn Wofford recalls a case in which an elderly man lived alone is a state far from his son. The man was gave his son permission to sign checks on only one account, although he had several. “So if Dad went into a nursing home,” said Wofford, ” when the checking account ran out of money, the son would have no choice but to apply for a conservatorship.” Wofford advises that to prevent suspicion or misunderstanding, “keep [the principal] in the loop, even if it means repeating information over and over.”

8) What changes can I make after signing a POA?
Most state laws let a capable principal substitute agents or revoke POA. If you do revoke a POA, notify all interested third parties immediately. Unless someone knows about the revocation, he can rely on the POA.

9) Does an attorney-in-fact get paid?
That depends on who you name and how complex your affairs will be. If your attorney-in-factis a close relative, he or she won’t normally be paid. But you can decide to pay them.

10) Can I appoint more than one person as my attorney-in-fact?
You can appoint one person (naming another as successor if the first can’t serve), or name several people to act as co-attorneys. Sometimes this is a good idea, notes attorney Andrew Hook if several adult children are responsible and willing to serve. “I frequently recommend that the client appoint multiple agents. The participation of more than one child in decision making seems to reduce the number of disputes. It also provides a safeguard against abuse… by having multiple parties involved in reviewing records and transactions,” said Hook. If you appoint more than one person at a time, specify whether the co-agents can act independently or must act together. Also state how you’d like disputes resolved.

11) Is my attorney-in-fact liable for mistakes?
An attorney-in-factis expected to do whatever is reasonable to run your personal or business affairs.
Sandra Foster, president of the Carat Connect, a Toronto financial services company, points out that “your agent need only act in what they BELIEVE is your best interests - not do exactly what you would do.” Foster advises anticipating situations and discussing them with your agent. You can limit liability to “willful misconduct or gross negligence”, which implies intentional or dishonest acts. And a substitute agent isn’t responsible for mistakes made before he took over.

12) Is there anyone who SHOULDN’T have a durable power of attorney?
Yes. If your list of friends and relatives contains no one trustworthy enough or emotionally tough enough to make health-related or financial decisions, you may want a court-appointed conservator or guardian. While appointing a conservator may be a hassle, it assures that someone is watching the checking accounts. If you don’t have a DPOA, you may want to place some assets in a living trust, especially if property to be transferred includes real estate. Consult your lawyer.

13) I found a great form book at the library. Why not just fill in the blanks?
A form might work if compatible with your state laws and properly executed, but that can be a trap as well as a bonus. No two lives are identical, and one size rarely fits all (as Cinderella’s stepsisters found while trying to squeeze outsized feet into a glass slipper.) Give thought and discussion to your POA before signing. Consulting a professional can make the difference between a plan that smoothes the rest of your life and one that turns it into a bad episode of “The Practice.”

Please call us at (916) 442-5835 today to discuss your durable power of attorney for asset management. You’ll be glad you did.

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