Most people have heard of a power of attorney or a durable power of attorney. But, what is it and why should you have one?
A power of attorney is a signed document that authorizes a person (an “agent”) to act for another for regarding a person’s financial affairs. With a power of attorney, your agent can manage bank accounts, pay bills, supervise and manage investments, and instruct preparation and filing of tax returns on your behalf. Logically, this becomes increasingly important as you age and/or, due to a circumstance, you are no longer able to handle these duties yourself. A power of attorney can be durable or non-durable, immediate or springing, general or limited. So what are all of these terms, anyway?
The term “non-durable” means that the agent’s authority to act for you terminates upon your incapacity. The term “durable” means that the agent can act for you even if you become incapacitated, whether because of an accident or illness or even advancing age. The durable aspect of a power of attorney is important because the time that most of us need another to act for us and manage our financial affairs is when we are incapacitated. In order for a power of attorney to be durable, specific language must be included which satisfies the requirements of the California Probate Code.
A power of attorney can be effective immediately upon signing it, thus the term “immediate,” or it can be “springing” which means that it will be effective upon some future event, such as your incapacity (typically invoked by certification of one or two physicians acknowledging that you can no longer make decisions regarding your own finances or affairs).
A “general” power of attorney gives your agent broad authority to transact business for you, such as transferring money between bank accounts, investing your money, writing checks for you, etc. Certain actions must be expressly authorized event in the “general” power of attorney document, such as amending or revoking a trust. Typically title companies will also want to see specific language authorizing actions regarding real estate. A “limited” or “special” power of attorney grants your agent authority to manage specific assets for a specific purpose. The powers that you give your attorney are up to you. An attorney drafted power of attorney can be customized to meet your particular needs and goals.
It is highly recommended that you appoint successor or alternate agents to act if the first one cannot or wishes not to act in that role as agent. No matter whom you choose, your agent and your successor agent(s) should absolutely be someone you trust and know well.
A power of attorney is extremely important because without one, if something were to happen to you, nobody would be able to manage your finances or other affairs for you. In these circumstances, the courts would have to get involved to appoint a conservator of your estate – an expensive, invasive, and time consuming process. It may also be reassuring that appointing an agent under a power of attorney does not restrict your own ability to continue to manage your own affairs and you retain the ability to amend or revoke the power of attorney.
If you already have a power of attorney, you are not necessarily home free. It is recommended that you review your power of attorney every couple of years to not only ensure that the person(s) named as an agent still can and will act for you in that role, but that you are also still comfortable with the powers given to the appointed agent. Anyone dealing with the above issues should contact the Chilina Law Firm or another law firm focusing on estate planning for legal advice.
Authored by Karen Chilina and Co-Authored by Greg Chilina
Chilina Law Firm, a Professional Corporation, is a full-service estate planning, probate, trust administration, business law, and real property law firm that provides a wide-range of advising, transactional, and litigation services to its clients from its office located in Atascadero, California. The firm’s attorneys represent individuals and business entities in an assortment of transactional and litigation matters involving estate planning (including trusts, wills, powers of attorney, and medical directives), probate, trust administration, as well as general business law, contracts, corporate governance, land use, and real property. Chilina Law can be contacted by telephone at (805) 538-5038 or by email atinfo@chilinalaw.comor visit the Chilina Law Firm at www.chilinalaw.com. Chilina Law Firm is based in Atascadero, California and serves North San Luis Obispo County communities, including Santa Margarita, Atascadero, Templeton, Paso Robles, and San Miguel.
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