The Importance of a Durable Power of Attorney

Photo by Patrick Moore

Some form of durable power of attorney should be part of everyone's planning planning for aging and possible incapacity.  The durable power of attorney appoints an agent or "attorney in fact" to act for the grantor in making financial and healthcare decisions when the grantor is unable to make those decisions due to incapacity.  The grant of powers ends at death or when the grantor regains the capacity to make decisions.   If you have a durable power of attorney, and you have a car accident, a head injury, or a stroke or if you suffer from severe dementia, your designee will be able to manage your financial affairs and make decisions affecting your medical care until you are capable of making those decisions again yourself.

The forms and names of these document vary by state, and in some states the durable power of attorney is split into two documents called the powers of attorney for healthcare decisions and for financial decisions.  Your state's customary form is not important for this discussion.

Here are some things to think about in reviewing a durable power of attorney:

• When and under what circumstances does the agent or attorney in fact have the power to act for the grantor?  Some powers of attorney will include provisions requiring a physician's determination of incapacity before becoming active, and others confer powers on the attorney in fact from the time of signing and grantor trusts the attorney in fact to not use the conferred powers prematurely.  I've also used a separate agreement between the grantor and the attorney in fact that specifies the conditions under which the power of attorney will "spring to life."  The advantage of using the separate agreement for a "springing power" is that when the attorney in fact presents the power of attorney document to a financial institution, the financial institution doesn't have to require proof that any provisions describing incapacity determinations have been met.

• Does the power of attorney provide a workable arrangement for managing financial affairs and/or healthcare decisions?  A couple of years ago, I recommended that my mother update her durable power of attorney and other estate planning documents, and I recommended a lawyer friend to do the work.  Unfortunately, the documents he created for my mother would have created a management mess, and I had to recommend that she have her estate planning documents redone by another lawyer.  One of the management issues was his designation of two attorneys in fact, given similar but not identical powers, who were explicitly directed that they had no duty to cooperate or communicate.  In this case, my sister and I both would have had the duty to manage my mother's financial affairs, half a continent away from each other and from my mother, with no duty to cooperate.  Could we have done it despite the language of the power of attorney?  Sure, but why work with a power of attorney that makes the process more difficult?

• Does the power of attorney make sense in all of its provisions?  Another issue with the problem power of attorney created by my lawyer friend was that he had worked from a draft created for another client.  Because he had not proofread the document before presenting it to my mother for signature, a provision from the other client's power of attorney was included in my mother's document.  This errant provision named someone unknown to my mother to review the performance of her attorneys in fact.  You should carefully read all of your estate planning documents and any documents that name you as an attorney in fact and ensure that you understand all of the provisions.

Talk to your lawyer if you need to update your durable power of attorney and become familiar with the powers of attorney created for your parents.  You should understand the provisions of this document before being called to act under them.