What is a Durable Power of Attorney and Who Needs One?

By Lori Leu, Erin Peirce, Lauren Olson, and Laura Chavero

After seeing family over the holidays and contemplating the future, some people’s thoughts turn to making a Will. However, the most important estate planning document is actually a Durable Power of Attorney.

A Durable or “Financial” Power of Attorney is a legal document by which you designate someone to serve as your agent with the legal authority to act on your behalf in financial affairs, including managing accounts, paying bills, and selling real property, among others things. Importantly, a Durable Power of Attorney does not give the agent named the authority to convert your assets to his or her own benefit; rather, it appoints someone that you trust to handle your financial affairs on your behalf if you are unable to handle them on your own.

So, why is the Durable Power of Attorney the most important document in your estate planning portfolio? Because without it, no one is legally authorized to handle your finances to help pay for your care. For example, imagine that your loved one is diagnosed with dementia. Previously, they had been very independent and never involved anyone in their finances. However, you recently noticed overdue bill notices on the counter and stacks of unopened packages and mail. Upon further investigation, you discover a large amount of debt and very little savings. Unfortunately, your loved one is unable to live alone and needs additional help. However, their income is not sufficient to pay the cost of assisted living, there is no long-term care insurance, and they are not eligible for public benefits. Unless your loved one has named you as their agent in a Durable Power of Attorney you will be unable to access their funds to pay for their care. You will be unable to sell their assets, including their house, to keep them healthy and safe. Without a legal document appointing a financial agent, the only way you will be able to help pay for your loved one’s care, pay their bills, or otherwise manage their finances, is to be appointed the legal guardian of the estate by a judge through a lengthy and costly court process.

A Durable Power of Attorney should be executed after great contemplation. It can be effective immediately or it can be “springing,” that is, effective only upon a physician’s written confirmation of disability or incapacity. The person you appoint as your financial agent should be one with utmost integrity and one whom you trust to handle your affairs now and at the time when you cannot handle them on your own. If you do not trust the agent you have named to act for you immediately, be careful about naming that person to act for you when you are incapacitated. Alternate agents should be named in case any agent is unable or unwilling to serve, so that you always have someone trustworthy in place to act on your behalf. Additionally, due to recent changes in the law, if an agent will be signing in a real estate transaction, the Durable Power of Attorney appointing the agent must have been signed in the office of an attorney, a lender, or a title company.

A Durable Power of Attorney is recommended for everyone 18 years of age and older. Everyone, at some time, will need an agent to act on his or her behalf. Your wishes should be placed in writing while you have the ability to do so. Because a Durable Power of Attorney conveys broad and strong powers, before appointing a financial agent you should consider who would be worthy of such authority. Often people prefer to appoint spouses, children, or other family members as agents, to keep financial affairs private and avoid hurting feelings. However, appointing a family member may not be the best option for everyone. In all cases, signing a Durable Power of Attorney and appointing an agent should be done only after deep reflection as to the abilities and trustworthiness of each candidate. For a better understanding of the importance of estate planning documents and elder law issues, and to find an elder law attorney in your area, go to www.naela.org. 

Lori Leu, Erin Peirce, Lauren Olson, and Laura Chavero are Elder Law attorneys with Leu & Peirce, PLLC located in Plano, Texas. They can be reached at 972-996-2540.