Power Of Attorney Defined
A power of attorney is an arrangement under which one person (called the “principal”) gives someone else (called the “agent” or the “attorney-in-fact”) the power to act on his or her behalf.
The term “attorney” here is not the same as “lawyer” – any competent person can serve as the “agent” or “attorney-in-fact”, even if that person has no legal training. The powers given to attorney-in-fact can be as limited or broad as the principal wishes. Most powers will end when the principal becomes incompetent, but a “durable” power continues during the period of incompetence.
A durable power of attorney can be made effective immediately, or it can be written so that it “springs” into action only if the principal becomes incompetent. A springing power has the advantage of keeping complete control in the principal’s hands until the power is needed. Of course, the disadvantage is that it might be difficult to tell when the principal becomes incompetent. You invite litigation if you simply provide that the power springs into being “upon incapacity”. The document should define “incapacity” and designate a committee (perhaps doctor and named family members) to certify that incapacity exists.
As long as you remain competent, you can revoke or change your durable power of attorney in any way you wish, including the appointment of a new attorney-in-fact.
Advantages Of A Durable Power Of Attorney
Durable powers of attorney have several advantages over other devices. They are easier and less expensive to establish than most trusts. They avoid the need to involve the courts in a formal custodianship or guardianship.
One advantage that a living trust has over a durable power is that the durable power must end on the principal’s death. Assets that remain will pass under the principal’s will and therefore be subject to the expenses of probate. With a living trust, the trust does not end on death; instead, the trust assets will be distributed as set out in the trust without the need for probate.