A power of attorney (POA) is a document that authorizes another person to act for you. This person is called your Attorney in Fact, or Agent. The authorization may be limited to a specific matter (e.g. to sign a contract) or it may give the agent broader powers to handle all your legal and financial matters. As the person giving the authority, you are referred to as the principal.
An ordinary POA ceases to be valid if you become mentally incapacitated.
A durable power of attorney (DPOA), however, is similar to an ordinary power of attorney, except that it doesn’t become invalid if you become mentally incapacitated. A DPOA remains in effect for the duration of your incapacitation, whether that’s weeks, months, or years.
Why You Need One
If you do become incapacitated, then someone will need to manage your financial affairs. You will most likely have checks that need to be deposited, bills that need to be paid, investments to manage, and a home or other real estate to be maintained. Absent a DPOA, your family would be required to ask a court to appoint a guardian. By then, it will be too late to give someone a power of attorney.
Naturally, most people want to avoid a court-appointed guardian. A guardianship proceeding is expensive, causes delay, and gives you no say in who is appointed to manage your affairs. On top of that, family members may fight over who should be appointed or whether a guardianship is even necessary.
You can prevent this all from happening by having a DPOA. One of the benefits is it’s a voluntary delegation of rights. You get to
- state the actual powers that will be granted (and any limitations); and
- choose the person or persons to whom those powers are granted.
In being proactive, you are not giving away control, but simply delegating your rights to a person you trust. If you have a spouse, you may think you don’t need one because most of your property and accounts are joint. Your spouse can indeed manage the joint accounts in the event of your incapacity.
But if you own (or expect to own) real estate together, it can be difficult to sell it if you need to. You would both have to authorize it. If you are incapacitated and you don’t have a DPOA authorizing real estate transactions, your spouse is stuck, and would need to pursue a guardianship.
The same may be true of a vehicle depending on how it is titled. And, to the extent that you do have separately owned property, your spouse will not be able to manage or sell it once you are incapacitated without a DPOA.
So What Should I Do?
I recommend that everyone have an estate plan that includes a DPOA. If you want more information about estate plans and things you need to think about to prepare them, then I recommend that you download my free book, A Guide to Creating Your Estate Plan. It will get you a long way towards achieving that goal.
But if you live in Burlington, Camden, Gloucester, Salem, or Cumberland counties, have decided that you need to put together an estate plan, and are ready to move forward to create one, then just click here to schedule a free, no obligation phone call to discuss it.
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