Before we get into what makes a power of attorney durable, let’s review some power of attorney basics. Generally speaking, a power of attorney is a document that when properly drafted and executed by the person creating the document, called the principal, the principal appoints another person, called an agent or attorney-in-fact, to act on the principal’s behalf. Basically, there are two types of powers of attorney, one for financial management and one for health care. The power of attorney for health care is commonly referred to as a medical directive or advance health care directive. This article focuses on the power of attorney for financial management, only.
A financial power of attorney may be immediate or it may be springing. The term springing means that the power of attorney takes effect only on the occurrence of an event specified in the power of attorney document. Once the power of attorney takes effect, the agent is authorized to act for the principal on any and all of the powers listed in the power of attorney document. This can pose a serious problem in that once a power of attorney is effective, the agent’s actions are not generally subject to supervision and it is possible for an abusive agent to take advantage of the principal. So the principal needs to choose wisely regarding who they have appointed as their agent.
Also, it is important that a power of attorney list an alternative agent or two in the document. This is because the power of attorney document may be rendered useless if the one and only agent listed in the power of attorney lacks capacity themselves, or refuses to act as the agent.
This takes us to what makes a power of attorney durable. A durable power of attorney simply means that the power of attorney is effective and can be exercised even when the principal becomes incapacitated or subsequently lacks capacity. So think of it this way, a power of attorney that is not durable becomes ineffective if the principal ever becomes incapacitated. A power of attorney that is not durable terminates upon the principal’s incapacity. However, a durable power of attorney will stay in force and effect even if the principal later becomes incapacitated. Since the main purpose of a power of attorney is to give the agent the powers to act as listed in the document on behalf of the principal, you can see why it is important that a power of attorney be durable in order for the agent to continue to act for the principal when the principal is not able to act for themselves due to incapacity.
In order for a power of attorney to be durable or effective upon the principal’s incapacity, the power of attorney document must contain words that expressly state “this power of attorney shall not be affected by subsequent incapacity of the principal”; or “this power of attorney shall become effective upon the incapacity of the principal” or some language of a similar nature. The failure of a power of attorney document to contain such language means that the power of attorney is not durable and, as noted above, terminates upon the principal’s incapacity.
Power of attorney documents are complicated and powerful documents. Serious problems can arise if the wrong agent is appointed, if the document is incorrectly drafted or executed, or if the power of attorney fails to be durable. Because of the potential dangers, it is highly recommended that anyone who already has a power of attorney or who is considering a power of attorney, contact the Chilina Law Firm or another California attorney who practices in the area of estate planning and conservatorships.
Authored by Karen Chilina and Co-Authored by Greg Chilina, October 26, 2015.
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 firstname.lastname@example.org visit the Chilina Law Firm atwww.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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