What, How and When They are Used.

A power of attorney (POA) is a type of relationship between two people: the Principal and the Agent. The relationship is similar to employer and employee. The agent serves the wishes of the Principal. This seems odd since most of us think that the Agent has all of the control. However, the Principal tells the Agent what to do in the document that grants the POA. This relationship not only gives the Agent the power to act for the Principal, it can also prevent a conservatorship if it is durable. A durable power of attorney (DPOA) is a POA that works even when the Principal lacks capacity. A non-durable POA relationship ends once the Principal is incapacitated.

Power of Attorney – Uses

A DPOA gives the power to do business for someone else. It allows the Agent to sign documents, transact business, and make important financial decisions for the Principal. This power is usually for everything from real property to banking transactions. The powers are so broad that the Agent can stand in the shoes of the Principal for almost any kind of business.

An agent is a “fiduciary,” meaning, the law holds him or her to the highest standards of conduct. An must act in the Principal’s best interests at all times. The Agent can’t take advantage of the Principal for his or her own self-interest (called “self-dealing”). In fact, spouses are fiduciaries because they are expected to act in each other’s best interests.

Types of Power of Attorney

There are two types of DPOA. A springing DPOA works once the Principal is incapacitated. The DPOA will state how to prove incapacity. Usually a DPOA springs into effect when two doctors or the court states that the Principal is incapacitated. An immediately effective DPOA is just like it sounds – it takes effect right away. California is a community property state and spouses have a duty not to harm each other or their property. Therefore, a typical DPOA between spouses takes effect immediately.

How Power of Attorney is Given

We’ll use the springing power of attorney as our example. The Principal signs a form that states who will work for the Principal, when, and with what powers. The Principal signs this document in front of a notary. When doctors discover that the principal lacks capacity (a tricky subject worth it’s own blog), the Agent’s job springs to life. The crucial thing is that the Principal MUST have capacity to create a DPOA, otherwise, it is ineffective. If a real property transaction is needed, the DPOA is recorded with the county clerk in the county where the Principal owns property.

Conclusion

A DPOA is a powerful estate planning tool. We include a durable power of attorney with all of our estate plans, so skip paying for them at your local copy/shipping store. You can also find the forms for free all over the internet. If you have more questions about how to obtain a durable power of attorney, how they work, and when they are best used, contact us at this link to set up a free consultation: contact us.