The Importance of a Durable Power of Attorney for Your Family

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    Clients who come to our offices often ask this question. They are also unclear as to how a Durable Power of Attorney (or DPOA) for finances interacts with their trust. This article will answer both those questions but will not cover DPOAs for health care (aka Advance Health Care Directives) – which is a separate topic for another time.
    You must have capacity to sign a DPOA. You never know when you will need a DPOA so it’s a good rule of thumb to have one prepared and signed in case the unthinkable suddenly occurs (for example, you suffer a stroke, you’re in a debilitating car accident, you have other medical issues that you know are going to affect your ability to think clearly in the future, etc.). The effect of waiting too long to execute a DPOA can be devastating and expensive because the family may then need to petition the court to appoint a conservator. Remember: You need a DPOA even though you may have a trust in which you’ve designated successor trustees. Why?
    Because your successor trustee(s) will only have control over the assets that are titled in your trust. If you have a bank account that isn’t in your trust, but you want a relative to use that money for your health care needs or you want the money transferred to your trust, you will need to follow specific procedures: The bank won’t give that person access to the bank account unless you have executed a DPOA naming that person as your agent, designating him/her as an authorized signator on the account, or putting that person on the account as an owner (which isn’t advisable for a variety of reasons). Likewise, if you have insurance policies, retirement plans, long-term care insurance policies, government benefits, or any number of other assets usually not titled in the trust, the personnel at these institutions won’t even talk to anyone but the owner of the policy or plan unless that person holds a DPOA from the owner.
    So, it is important to keep in mind that both the DPOA and the trust work together to allow someone else to take over for you when you become unable or unwilling to manage your financial affairs any longer. For that reason, your named successor trustees in your trust are usually mirrored in your DPOA as your agents.
    Finally, you should be aware that there are two kinds of DPOAs: those that come into effect immediately and those that are referred to as “springing.”
    Those that come into effect immediately should be executed only when you feel you can no longer handle your financial affairs even though you still have capacity. You must be totally comfortable and confident that the person you designate as your agent won’t abuse their power to your detriment.
    Most people prefer signing “springing” DPOAs, which don’t come into effect until it is determined by a doctor and/or by specially-designated relatives or friends – usually, but not always, in consultation with your treating physician – that you are no longer capable of managing your affairs. The language used in the DPOA can be tailored to suit your preferences. These types of DPOAs are a little more difficult to use because steps have to be taken before they’ll come into effect, but if they are drafted to conform to the Probate Code, institutions must accept them or risk being taken to court and paying for attorney fees.
    DPOAs are useful tools for you and your family should the need arise. They – like all your other estate planning documents – should be reviewed every few years to make sure they reflect your current desires and designate currently accessible agents to act on your behalf.
    Nola Chavez is with Southworth and Chavez, LLP. Visit www.southworthchavez.com.

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