Importance of Having a Durable Power of Attorney

This article deals with the scenario of a loved one who becomes incapacitated and therefore needs someone to execute appropriate planning of their estate. The fact is, in the absence of an estate plan, only a properly drafted General Durable Power of Attorney will afford a level of flexibility necessary to make critical decisions about an incapacitated person’s estate. In this article, I’ll talk about how the Power of Attorney plays an important role in the planning and protection process.

Courtesy of http://www.jbmartinlaw.com/Portals/64616/images/iStock_000013801425XSmall-resized-600.jpgWhat does a Durable Power of Attorney do? Well, this is a legal document that an individual prepares while they are mentally able to read and understand the document. The document cannot be drafted after you’ve become incapacitated. Once you become incapacitated, the document states who will be appointed an Agent (which is either individual or multiple individuals) to act on the incapacitated individual’s behalf. Think of this agent as a “helper” to get your affairs in order. But keep in mind, you should try to avoid stock language for a Durable Power of Attorney where you just state, “my agent has the power to do whatever I could do if I was there.” We recommend providing specific instructions on what should be done in certain circumstances so there are clear directives for the Agent, which reduces the chances that the Agent goes beyond their scope of authority.

A Durable Power of Attorney provides extensive power to the individual who is assigned that role. The Power of Attorney routinely includes the ability to make many financial, real estate and medical decisions that allow the Agent to essentially step in and act on behalf of the incapacitated individual.

Along with determining who should be given this powerful role, you should assess who will determine when you are in fact “disabled”. This is important since the Durable Power of Attorney only kicks in when you are declared disabled. There is a tool known as the Disability Determination Developer that helps with this decision. It is a tool that helps you select a panel of family members, friends and medical advisors who will be entrusted with deciding when you are in fact “disabled.”

Here is why all of this is so important – if you do not have a General Durable Power of Attorney, family members and loved ones will be restricted in how they can take care of the incapacitated individual or carry out any estate planning goals, if any, that the individual had. This also means that your assets may be fully exposed to creditors, a nursing care spend down or taxes. Absent an appointed Agent in a Durable Power of Attorney, it would be necessary for a family member or loved one to petition the court to become the guardian over the incapacitated person.

Even if a guardian is appointed, they will be limited by the parameters set out by the guardianship laws of Virginia, Maryland , or whichever state you reside in. Guardianship laws are not very flexible. Granted, they are meant to protect the incapacitated person, but the guardianship laws will not permit many of the planning techniques necessary for the protection of assets for the benefit of individuals other than the incapacitated person.

So what does all this mean? You should consult with an estate planning attorney so you can properly draft and execute a General Durable Power of Attorney, along with establishing a comprehensive estate plan, so your assets, and your loved ones, are protected.

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