What would happen if you were unable to communicate because of an incapacitating illness or injury, or if you were considered too senile to handle your own affairs? By having a properly prepared and executed Durable Power of Attorney, you may avoid having the courts take control of your money and your person by appointing a legal guardian.
A Durable Power of Attorney is a written document in which you grant to another person the power to conduct financial and legal transactions on your behalf during your lifetime. The person you name in your Power of Attorney is called your “agent” or sometimes your “attorney-in-fact.” Your agent can deal with your real property and your personal property almost as freely as you are able to.
The choice of an agent is very important, for a great deal of trust and confidence is placed on his or her ability to properly exercise the powers given. The agent you appoint to act on your behalf should be someone you trust to perform all acts with honesty, integrity and good judgment. Usually a person will name his or her spouse as agent, or may give a Durable Power of Attorney to an adult son or daughter. You may also wish to name one or two alternate agents in the event your first (or second) choice is unable or unwilling to serve.
An important reason for a husband and wife to give each other power of attorney is to provide flexibility in dealing with jointly owned property, such as their house, which generally requires the signature of both in order to sell the property or borrow money on it. If one spouse is incapacitated, the other spouse could have their hands tied as far as dealing with the property in concerned. In the event of a lengthy period of incapacity, this could become a hardship on the other spouse,
Here are several reasons to avoid a court-established legal guardianship if at all possible:
- Guardianship proceedings are complex, involved and expensive.
- The court-appointed guardian may be someone you do not know or someone you would not want to handle your financial affairs.
- A legal guardianship is cumbersome and inflexible.
- The court would have to legally declare you incompetent, this stripping you of many of your rights.
- The guardian may have to get permission from the court to spend your own funds on your behalf.
- A petition must frequently be filed setting forth what the guardian proposes to do with your funds, how much he or she wants to spend, and why it is necessary.
- Bonds must be posted.
- Every year a detailed accounting must be filed with the courts showing all the assets, income earned, and a report of all amounts paid on your behalf.
- All records of a legal guardianship are public information.
In contrast to a legal guardianship, the Durable Power of Attorney prepared by one of our attorneys can relieve your agent of the obligation of filing any accountings with the court. However, the Durable Power of Attorney should require your agent to keep an accurate accounting of his or her transactions and report the same to you or, at your death, to the personal representative of your estate.
Although you are bound by the acts your agent performs on your behalf, he/she is held responsible for acting in your best interest. Your agent may only use the Power of attorney on your behalf or for your benefit. He or she may not use it to benefit himself/herself. He/she may not change your will or your trust, nor may the agent make gifts on your behalf unless expressly authorized to do so in the Durable Power of Attorney.
One mistake that many people make is to wait until they are incapacitated or mentally incompetent to try to sign a power of attorney. At that point, it is too late, and a legal guardianship may be required. On the other hand, if you become mentally incompetent after you execute a Durable Power of Attorney, it remains valid unless the written Durable Power of Attorney provides otherwise. In other words, a Durable Power of Attorney will survive your incapacity until such time as a guardian revokes it.
A power of attorney that continues beyond mental incapacity should be a part of every estate plan. It will provide flexibility in dealing with property to meet the family’s needs and can avoid expensive and cumbersome guardianship arrangements.
Finally, upon your death, your power of attorney automatically becomes invalid and your agent is no longer authorized to use it.