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The Durable Power of Attorney: What Every Adult Should Know

by LeRoy Peterson Law

slider-3A durable power of attorney is an important component of every comprehensive estate plan. It allows someone you appoint to act in your place for financial and other purposes if at some time in your life you become incapacitated. Without a durable power of attorney, your family will not be able to make financial decisions for you during periods of incapacity unless a court appoints a guardian or conservator. This can be an expensive and time-consuming process.

Before executing this crucial document, it is important to understand what your options are. There are different variations or options you should consider. For example, the power of attorney can be either “limited” or “general”. A “limited” power of attorney gives your agent the power to act on your behalf for a very limited purpose and it usually ends at a time specified in the document. A “general” power of attorney is comprehensive and gives your agent all the powers and rights that you have yourself.

A “durable” power of attorney can be “general” or “limited” in scope. The term “durable” simply means it will remain in effect after you become incapacitated. Historically, the power of attorney document had to expressly state it was “durable” or else it was deemed to be not durable. Nebraska recently changed this assumption or default rule in January, 2013, with the adoption of the Uniform Power of Attorney Act, the (“New Act”). Under the “New Act”, a power of attorney will be deemed “durable” unless it expressly states otherwise.

Another fundamental aspect of a power of attorney is whether the grant of power to the agent is effective at the time of execution or whether it is “springing”. A “springing” power of attorney will allow your agent to act for you if you become incapacitated. The agent’s authority comes into effect at the time incapacity is determined. If using a “springing” power of attorney, it is important that the standard for determining incapacity be clearly laid out in the document. It is this determination of incapacity that will act as the trigger for the agent’s authority to “spring” into effect. Nebraska also clarified this issue in the “New Act” by including the assumption that a power of attorney is effective when executed unless the document specifically provides that it becomes effective at a future date or upon the occurrence of a future event or contingency (i.e. upon incapacity).

Until recently, one drawback to using a power of attorney has been the reluctance of banks and other financial entities to recognize the authority put forth by the durable power of attorney. Acceptance of powers of attorney is essential to its effectiveness as an alternative to guardianship. This was also recently addressed in Nebraska with the “New Act”. Under the New Act, a party that refuses to accept an acknowledged (i.e. notarized) power of attorney without having a legitimate basis for refusal can be subject to a court order mandating acceptance and liability for reasonable attorney’s fees and costs incurred. An example of a legitimate basis for refusal is if the person has actual knowledge of the termination of the agent’s authority.

Generally speaking, “nothing is forever”. If for any reason, you wish to change the person you have appointed to make decisions for you under a durable power of attorney, you may revoke the power of attorney at any time prior to incapacity. There are a few steps you should take to ensure the document is properly revoked, so please consult your estate planning or elder law attorney to make sure your desires are properly documented.

As tempting as it is to prepare a do-it-yourself power of attorney, it’s a good idea to have an attorney draft the form specifically for you. There are many issues to consider and one size does not fit all. Some of the most powerful aspects offered by a durable power of attorney include the power to make gifts, create or revoke a trust and complete other non-probate estate planning functions. However, these powers present some risk and issues, so you should carefully review these types of powers with an estate planning or elder law attorney.

So, what does all of this mean? The take away from this overview should be an understanding that the durable power of attorney is one of the most critical estate planning documents you should have in place. With the adoption of the Uniform Power of Attorney Act (Jan, 2013), many changes were implemented. The “New Act” provides more detail than the prior act and it includes many default assumptions. You will want to discuss your durable power of attorney options with an estate planning or elder law attorney to ensure that the new default assumptions are right for your particular situation.

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LeRoy Peterson

The greatest gift you can give to your loved ones is a comprehensive Estate Plan. When life gets altered with a poor health diagnosis or a death, the last thing your family should worry about is your estate, how assets will be protected, and how to financially cover these unexpected changes. Let’s work together to create the powerful documents that will make things easier when bad things happen.

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