DBTC Law Firm

The “Powerful attorney”

What is the #1, simplest, quickest, cheapest, easiest, most effective and universally-applicable legal action you can take to benefit yourself?  Answer:  A Durable/General Power of Attorney, sometimes jokingly or mistakenly referred to as “the powerful attorney.”

 

Most people are surprised to find that the dictionary does not define “attorney” as a lawyer, but rather an “agent,” a person who is authorized or deputized in behalf of another to act for them.  An “attorney at law” is thus, properly speaking, someone’s agent with respect to legal matters.  However, a “Power of Attorney” is not limited to legal actions, but is simply authority given by one person as the principal, to another person to act as their agent.  It does not have to be in writing, but proving that the attorney has been appointed, and the scope of their duties, is difficult if it is not in writing.

Learning the simple terms:

A “General Power of Attorney” is the granting by one person to another of general and unlimited authority to act in the principal’s behalf.  This is as opposed to a “special” or “limited” Power of Attorney which might be limited to a single transaction (closing on a house, signing a tax return, voting shares of stock, etc.).  Finally, a “Durable Power of Attorney” leaves the appointed attorney/agent with authority to act for the principal, even if the principal is so incapacitated that he cannot legally act for himself.  Thus, a Durable/General Power of Attorney is written authority from one person to another, by which the person appointed as the attorney or agent can act in all matters for the principal, even if the principal, himself, is legally  incapacitated.

Why Is This So Important?

All persons of legal majority potentially have legal actions that must be taken in their behalf– signing tax returns, making medical decisions about their care, signing loan documents or managing their assets, whether that be a $50 checking account or a $50 million investment account. Incapacity can occur at any age and stage of life: it can be a traumatic coma resulting from a car accident to the young head of a family, or age-induced dementia to an older person. Without a Power of Attorney in place, all of the financial, legal and business affairs of a person suffering such disability must be handled through a probate court proceeding called “guardianship.”  Though designed to protect the assets of the incapacitated person, guardianships are quite expensive, quite burdensome and quite inflexible, and can result in the court naming as  guardian a person whom the incapacitated party would never have chosen for that task if they had been given, prior to incapacity, that choice.

Why Is It So Practical?

A person holding a General Power of Attorney has unlimited legal authority to manage all of the affairs of the incapacitated person without the bother, cost, delay or inflexibility of a guardianship, and, most importantly, the person appointed as the Power of Attorney would in fact be the person selected by the now-incapacitated person.

Why Is It So Simple and Cheap?

Durable/General Power of Attorney forms are prepared on standard formats, the fee for which is typically low, relative to other legal services. They can be configured to not come into effect unless and until the principal becomes incapacitated.

How Are They Typically Used?

Typically, a Power of Attorney is given back and forth between spouses; parents and children; and other family members who have a trusting relationship and who are simply designating through the Power of Attorney the person that they would prefer be the guardian if an incapacity occurs.

Caveat:

While a simple document, its ramifications and the details of its implementation are such that the advice of an attorney in implementing a power of attorney should be sought – at the price, it is indeed a “penny’s worth of prevention” to avoid a “dollar’s worth of cure” if it has not been correctly accomplished and is later needed. Also, though a person holding a Power of Attorney is in a fiduciary position, legally obliged to carefully and faithfully exercise the authority so given, it can be abused.  To use that authority to steal funds from the principal or otherwise abuse their interest is a breach of fiduciary duty which may give rise to civil or criminal liability.  Choice of the agent, and empowering them with this document, is a decision requiring careful selection.

 

Typically, a Durable/General Power of Attorney is a single element of a more comprehensive estate plan; however, it is probably the cheapest, most effective and helpful part of an estate plan and can be used, independently, of any other legal actions.

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