What is a Durable Power of Attorney?
A durable power of attorney is a document through which you to appoint another person (or two people) – your “attorney-in-fact” – to step in and manage your financial and legal affairs if and when you ever become incapacitated. For many of us, the durable power of attorney is the most important estate planning instrument – even more important than a will. What happens if there is no durable power of attorney? Without it, family members may well have difficulty paying bills, accessing accounts, and dealing with business interests. They may not be able to pay for the medical care you need, to maintain your house, or to care for your loved ones.
As a result, absent this relatively simple document, family members often have to go to court to appoint a conservator or guardian to manage the incapacitated person’s affairs. That court process takes time, costs money, and the judge may not choose the person you would prefer to serve in this role. In addition, once a guardianship or conservatorship is in place, the representative may have to seek court permission to take planning steps that she could implement immediately under a simple durable power of attorney.
One of my cases illustrates how much easier this process can be if a durable power of attorney is in place. My client, a successful accountant, unfortunately became somewhat demented due, apparently, to longtime excessive drinking. He had an ongoing business that he could no longer manage which involved many complicated matters, including a dispute with a key employee and concerns by his major client about the confidentiality of its records.
Fortunately, a few years earlier the client had executed a durable power of attorney naming his son as attorney-in-fact. Using the power of attorney, the son was able to get himself appointed instead of his father as the key corporate officer for the accounting firm and to fund the client’s revocable trust to be managed by a respected trust company. As corporate officer, the son could oversee the winding down of the business, work out matters with the client and former employee, and take care of cleaning out his father’s apartment and signing an agreement for his father to live at an assisted living facility. Without this one document, he would have had to seek court authority, not only causing delay and added legal expenses, but also making his father’s situation public and having to serve his father with papers establishing his incapacity, potentially causing a dispute between them.