A Durable Power of Attorney (DPA) is a vitally important estate and business management planning document. The benefits of a DPA are its low cost, its continuing effectiveness in the event of incompetency and the relative ease of transferring title to real property.
A Durable Power of Attorney signed by a person, commonly referred to as a Principal or Donor, delegates to another natural person, commonly referred to as Agent or Attorney-in-Fact, authority to lawfully make decisions and take actions for the Principal’s exclusive benefit. The person designated as the Agent may be a trusted family member or friend, not a licensed attorney.
The scope of the powers delegated to the Agent may be extensive or limited. The most common Durable Power of Attorney is generally broad in scope permitting the Agent to make decisions and take actions lawfully permitted by the Principal. Most states have adopted some version of the Uniform Power of Attorney Act, which sets forth the specific delegated powers incorporated into a Durable Power of Attorney.
Powers commonly delegated under the Uniform Power of Attorney Act include the following:
A. Real property transactions
B Tangible personal property transactions
C. Stock and bond transactions
D. Commodity and option transactions
E. Banking and other financial institution transactions
F. Business operating transactions
G. Insurance and annuity transactions
H Estate, trust and other beneficiary transactions
I. Claims and litigation
J. Personal and family maintenance
K. Benefits from Social Security, Medicare, Medicaid, or other governmental programs or civil or military service
L Retirement plan transactions
M. Tax matters.
As a general rule, actions pertaining to the execution of testamentary estate planning documents, Medicaid planning and lifetime gifting are not delegated powers. Nevertheless, with the current uncertainty regarding governmental and private healthcare insurance programs, the inclusion of provisions providing flexibility in the selection, application and funding of such programs is advisable.
A DPA may delegate powers pertaining to the Principal’s healthcare, but generally the scope of delegated authority is limited to financial matters. Health and medical decisions in the event of incapacity are customarily set forth in advance directives, living wills and appointments of healthcare proxies.
The legal authority of the Agent to act on behalf of the Principal may become effective immediately upon the signing of the Durable Power of Attorney or may be delayed to a certain time, a specific future event or upon the mental or physical incompetency of the Principal. A Durable Power of Attorney triggered by the incompetency of the Principal is referred to as a Springing Durable Power of Attorney. As stated in the DPA, the determination as to a Principal’s future incompetency may be at the discretion of the named Agent, or may be as determined by the Principal’s primary attending physicians.
A Principal must be legally competent at the time of signing the Durable Power of Attorney. An attending physicians’ affidavit should be procured if there is a question as to the Principal’s competency. Other signing formalities, depending on the applicable state law, may be the same as the execution of a last will & testament or the transfer of interests in real property. Generally, state law does not require the recording of a Durable Power of Attorney to be effective, but check regulations for your specific state. For example, in Missouri recording is required if an Agent transfers title to real property pursuant to the terms of the Durable Power of Attorney.
A Principal may sign more than one version of a Durable Power of Attorney. Unless specifically stated in a subsequently executed Durable Power of Attorney, previously executed Durable Power of Attorneys are not revoked. A DPA may be terminated by a.) the voluntary revocation by the Principal, b.) the death of the Principal, c.) depending on state law, the appointment of a court-ordered Guardian, or d.) the attainment of a specified date as set forth in the Durable Power of Attorney.
A Business Durable Power of Attorney provides for business continuity in the event an owner desires to delegate management responsibilities to a third party. The Business DPA may become effective a.) immediately, b.) at a future time certain or future event, or c.) upon the mental or physical incapacity of the business owner. A duly authorized and acting owner of a business enterprise, may sign a Business Durable Power of Attorney, designating a natural person to serve as Agent for the benefit of the Principal business. The Agent, in his capacity as a fiduciary, is permitted to lawfully make decisions and perform actions as set forth specifically in the Business DPA for the exclusive benefit of the business enterprise.
In the event of legal incompetency, one’s failure to have in place a Durable Power of Attorney may result in a court appointment of a Guardian of the Estate. Guardianship proceedings are lengthy, expense and oft times involve familial confrontations with the appointment of a Guardian not of the incompetent’s choosing. Therefore, consultation with an elder law professional for the preparation of a Durable Power of Attorney is extremely important and highly recommended.
Thomas Russell
Thomas S. Russell is a licensed attorney in Arkansas and Texas, “helping people use the law to resolve critical life conflicts,” regarding issues of elder care, healthcare directives and asset transfers. He serves as the Board Secretary for the United Pentecostal Church Loan Fund and as a Board member for Word Aflame Church in Little Rock, Arkansas.