9 Questions to Ask and Answer in Preparing Your Durable Power of Attorney
In the post Do I Need a Lawyer to Get a Durable Power of Attorney? I list the types of questions an attorney can help you answer, but let’s also answer them here:
- Who should you appoint? Appoint someone you trust who also is well-organized. It can be hard to get both attributes in the same person. If you have to make a choice, go for trust first. You need to be confident that the person will always act in your best interest.
- Should you appoint more than one person? That depends on your situation. Appointing two people provides back up in case the first person is unavailable, whether permanently or temporarily. It also allows them to divide the responsibilities so that it’s not too much burden on either one. But you have to appoint people who will communicate with one another. I wouldn’t appoint more than two because that makes communication all the more difficult. Also, we’ve heard reports that some banks and other financial institutions now require both agents to sign all checks and other documents. That should not be the case if the power of attorney directs that the agents can act “jointly and severally,” but it’s a concern, especially if you have more than two agents.
- How many original powers of attorney do you need? We generally have our clients sign two originals—one that they take with them and one that we hold in reserve. In most cases, copies work as well as originals, but not always. If the power of attorney is needed to convey real estate, an original will have to be recorded, though it will be returned once the recording is complete.
- Where should you store them? Somewhere safe, but also accessible. A filing cabinet should be fine—just let your agent know where to find it. We discourage putting original documents in safe deposit boxes unless you make sure that your agent has access.
- Should the document only take effect when you become incapacitated? That is called a “springing” power of attorney. We generally discourage such powers of attorney because proving incapacity becomes a hurdle to using the document. In our office, almost all powers of attorney are effective when signed, even if the intent is that they will only be used when needed. If you trust your agent, then we hope you will trust him not to act until necessary. If he starts using the power of attorney before you want to, you can always revoke it and appoint someone else.
- Should your attorney-in-fact be able to make gifts to others on your behalf and, if so, should there be any limitations? In most cases, powers of attorney do permit making gifts so that your agent can continue any gifting you have been conducting yourself. In addition, having the ability to make gifts can be important for estate planning and especially for Medicaid planning. Many form powers of attorney limit gifts to $15,000 per recipient per year, which is the gift tax exclusion amount. While this limitation can provide some protections, it could also limit the ability to protect assets for your family. So we discourage including any limitations in durable power of attorney documents.
- Do you want your attorney-in-fact to create a trust for you or to amend an existing trust? We would encourage you to include both powers in your durable powers of attorney because it gives your agent more flexibility to take estate planning steps on your behalf if this would be beneficial to you and your family.
- What happens if you move to another state? In that case, we would encourage you to sign a new durable power of attorney. While your existing document will still be effective, each state has its own rules and customs. Some have statutory forms that banks and other financial institutions are accustomed to seeing. It’s better to use forms that are customary in your state.
- Do you want your attorney-in-fact or someone else to serve as your guardian or conservator if that ever becomes necessary? While one purpose of durable powers of attorney and other estate planning documents is to avoid the need for guardianship or conservatorship, sometimes they can’t be avoided. You may nominate the person or people you would like to serve in these roles if necessary. Most clients include such nominations in their durable powers of attorney, often nominating the same person. But think whether this is what you want and whether you want different people for the different roles.
If you can answer these questions, you will have a durable power of attorney that is better tailored to your wishes and potential future needs.