What is a Durable Power of Attorney?
This is an often asked question. Many people don’t understand what a “Durable Power of Attorney” is, and what it can do for them over the years. If it’s not part of your estate plan, it should be. Below we’ll explore the different types of Power of Attorney and how they affect you.
Today, a Will or a Trust is designed to come into effect upon your death. A number of conditions can put your estate at risk, if in the future. Should you suffer from:
• A decline in mental health.
• Go into a coma.
• Any other reason that prevents you from signing legal documents.
If these or other conditions happen to you then your estate will be put at risk. A Power of Attorney helps prevent you and your estate from being at risk.
A Power of Attorney will allow the person you designate, to act on your behalf in legal and financial matters. These can include:
• Banking decisions.
• Financial stock decisions.
• Buying or selling of real estate.
• Tax returns.
• Contract negotiations and signing authority.
• Medical decisions.
Durable Power of Attorney
A Durable Power of Attorney is in effect for an indefinite period of time. It should be noted that due to liability issues the following institutions may not accept this type of document.
• Financial institutions.
• Credit unions
They are unlikely to allow this type of Power of Attorney to be used, if more than 7 years have passed from when it was signed. A knowledgeable lawyer in California would recommend that this type of Power of Attorney be reaffirmed, before the 7 year time frame expires. By doing this it will always be accepted at the above mentioned institutions.
General Power of Attorney
Your Power of Attorney allows the person you designate to have broad powers to act on your behalf. A Power of Attorney is usually general in scope, unless you know specifically what powers you’d like to give to the person you designate.
Special Power of Attorney
This type of Power of Attorney is most often used for the sale of property, in order to handle a specific business matter. These are often used in the sale or purchase of a home, when you are not available to sign the necessary legal documents. They handle a specific business matter while you are still alive.
The person given the Special Power of Attorney may then act on your behalf to carry out your wishes, by executing any necessary legal documents. In the case of someone who is deceased, a successor trustee would need a Special Power of Attorney before they would be allowed to sell a home.
Limited Power of Attorney
This type of Power of Attorney is activated only when the person named, becomes incapacitated. It is often used in an estate plan by the trustee, but more often the trustee will already have been give a Power of Attorney that is:
The trustee would only be allowed to use a Limited Power of Attorney if you become mentally incapacitated.
Incapacity is determined by 2 physicians, who are not related through blood or marriage, to the person who is using the Power of Attorney. The physicians and the trustee are required to affix affidavits to the Power of Attorney. Once this is completed and recorded, then the Limited Power of Attorney may be used.
Institutions will generally require that the Limited Power of Attorney be recorded, prior to it being put into use. Should you regain your mental capacity, the Limited Power of Attorney may then be revoked if necessary.
At the Estate Planning Legal Center, APC we recommend that those without a Power of Attorney should consider the problems which may arise from not having one in place. This type of document ensures that your finances are taken care of in the event you become incapacitated and is a necessary step in ensuring your loved ones are taken care of, should you no longer be able to manage your daily affairs.