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How DURABLE Is Your Power of Attorney… Will It Be There To Catch You?

January 19, 2012

A Power of Attorney (POA) is a document giving a relative, friend, or institution the power to act for you.  You, as “Principal,” name that person or institution as your “Agent” or “attorney-in-fact” to manage your day-to-day affairs.  The authority that you give to your agent can be as broad or as narrow as you choose to make it.  A POA should be in writing and signed by you so that your agent has something to show as his or her authority to act for you.

The problem with a standard POA is that it is automatically suspended when you become incapacitated.  This is at a point when your family would need it most.  Therefore, a Durable Power of Attorney (DPOA) is required.

A DPOA contains the words “This POA shall not be affected by my disability” or This POA shall become effective upon my disability,” or something similar.  In Order to be valid, it must be signed by you BEFORE you become disabled.

If your POA stated that it is not affected by disability, it is an immediate DPOA and your agent can act on your behalf as soon as you sign the POA.  If your POA states that it is effective upon disability, it is a springing POA and will be more difficult for your agent to use since your disability will need to be proven for your agent to be able to act.  In most cases, you will want your agent to have broad powers and be able to do anything you could do.  A DPOA might authorize your agent to do any or all of the following:
-Pay for support and care
-Borrow funds
-Conduct banking transactions
-Deal with property
-Handle legal claims
-Gain entry to safe deposit boxes
-Deal with insurance and retirement benefits
-Prepare and file tax returns
-Exercise stockholder rights
-Contract for services
-Make gifts
-Collect Social Security and other benefits

In order for a DPOA to work, you have to give the agent a great deal of power and authority.  Thus, you should be sure to choose someone you trust and have confidence in to handle your affairs.

Some people mistakenly believe that their spouse can act in their behalf if they become incapacitated.  Although you spouse can still sign checks and make withdrawals on a joint bank account, they cannot sell jointly owned stocks, real estate, assets, or other property not held jointly without your signature.  Even if you own everything jointly, you both should consider having a DPOA.

The biggest set back problem with any POA is that there is no guarantee that it will be accepted or recognized by third parties.  For example, the Social Security Admin. and Veterans Admin. have their own POA form and generally will not accept any other POA.  There are even institutions like banks and credit unions that may refuse to accept a POA.

Another problem occurs if you have an individual as your agent and he or she “quits” or dies or becomes disabled.  In such event, if you haven’t named an alternate agent, there will be no one to act on your behalf.

Next time we’ll take a look at what happens if you don’t have a POA or DPOA…

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