DURABLE POWER OF ATTORNEY
The prior blog entry described the Health Care Proxy and the HIPAA Release documents. These documents provide for someone of your choosing to make health care decisions for you in the event you cannot make them for yourself, and receive information about your medical condition. These documents don’t allow your chosen Agent to pay for medical services or other expenses you more regularly incur.
The document that allows someone of your choosing to pay your bills and make financial and legal decisions for you is called the Durable Power of Attorney. Anyone over the age of 18 and who has the capacity to enter into a contract can execute a Durable Power of Attorney. The word “Durable” is important because if you or someone you know has executed a regular Power of Attorney, then that relationship terminates in the event you/the Principal becomes incapacitated.
There are two kinds of Durable Powers of Attorney – a Present Grant and a Springing Power
A Present Grant Durable Power of Attorney takes effect immediately upon execution and does not require any finding of incapacity about you/the Principal. It will not be revoked in the event you become incapacitated. A Springing Durable Power of Attorney does not go into effect until it is determined that you/the Principal no longer have the capacity to make financial and legal decisions. A disadvantage
A Springing Durable Power of Attorney does not go into effect until it is determined that you/the Principal no longer have the capacity to make financial and legal decisions. A disadvantage to the Springing Power is that “proof” of the Principal’s incapacity will likely be required by any institution being asked to honor that document (e.g. bank, investment firm, mortgage lender, etc.). The time and money expended in getting this proof may be detrimental to the Principal’s financial or legal circumstances.
A Durable Power of Attorney (DPOA) can be revoked, but unlike a Health Care Proxy, a DPOA does not automatically terminate in the case of a separation or divorce. The DPOA terminates at the death of the Principal and at that time the Personal Representative (f/k/a Executor) takes over the financial and legal administration of the estate.
A DPOA relationship differs substantially from a joint account relationship. For instance if your bank account is registered John Smith and Susan Smith as joint owners, then both John and Susan are considered owners of those assets. If Susan Smith was the DPOA for John Smith then only John owns those assets.
Challenges Even If You Execute a Durable Power of Attorney:
Even if you’ve done everything right, you and/or your Power of Attorney may still run into obstacles in trying to use that document. A Durable Power of Attorney (DPOA) should contain the following language (or something similar):
This Durable Power of Attorney shall be exercisable notwithstanding the lapse of time since the execution of this instrument.
If this language is included, the document is supposed to be honored regardless of the date of its execution, however certain banks and financial institutions resist accepting the DPOA. If you have a longstanding relationship with any bank, or other financial institution, it may make sense to execute their forms at the time the generic DPOA is drafted and executed. In the interest of full disclosure I used to work for one of these institutions and asked for “our form” many times.