There’s a lot of confusion about what exactly a Durable Power of Attorney is, when it is active, and what it accomplishes. In fact, I would suggest that there are many myths and mistakes concerning what Durable Powers of Attorney really are. So today I’m going to do my best to describe this important estate planning document.

A Durable Power of Attorney is a document where you appoint someone as your “attorney in fact” to sign your name for various legal matters. Although many consider the Durable Power of Attorney to be a “form” document it is anything but. You can limit the powers to a specific task (sign checks on your checking account to pay bills, for example) or grant broad powers such as a power to convey real estate that you own or transfer assets to others on your behalf.

When signing a Durable Power of Attorney, you should carefully consider the powers that you are granting to the individual named in the document, as you are entrusting them to act in your best interest. If you feel that the powers granted under the Durable Power of Attorney are too broad, there is nothing that prevents you from asking your attorney to delete certain powers. With that said, if you don’t trust the individual that you are naming in the document to act only in your best interest, then you probably should not be granting that individual a Durable Power of Attorney to begin with.

Durable Powers of Attorney do not assist your estate in avoiding probate. This is because the Durable Power of Attorney is only valid and active so long as you are alive. The Durable Power of Attorney ceases upon your demise. The “Durable” in the “Durable Power of Attorney” means that the Power of Attorney survives your incapacity. Contrast this with a “General Power of Attorney” that doesn’t survive your incapacity.

Durable Powers of Attorney are generally valid the minute that you put pen to paper. In other words, they are not active only upon some contingency, such as your incapacity. Up until 1996 in Florida you could not even create a “springing” power, such as one that would “spring into being” upon your incapacity. In 1995 the statute was changed to allow springing powers, but as a practical matter I do not recommend springing powers to my clients.

The reason that I do not recommend “springing” Durable Powers of Attorney is due to the fact that in my experience, banks, brokerage houses and other institutions often will not accept a springing Durable Power of Attorney.

Consider this example:  Susan grants her daughter Jennifer a Durable Power of Attorney, but it only becomes valid upon Susan’s incapacity. Susan suffers a stroke, so Jennifer brings the Durable Power of Attorney to the bank in order to obtain the ability to write checks and pay bills from her mother’s checking account. The clerk at the bank notices that the Durable Power of Attorney is only valid upon Susan’s incapacity. The bank has no knowledge of Susan’s condition. They therefore deny Jennifer the ability to transact business on her mother’s account.

Jennifer, who is quite upset at this point calls her mother’s doctor and asks for a letter. It is my experience that physicians are reluctant to sign letters indicating that their patient is incapacitated, as the physician fears liability both under today’s privacy laws as well as if Susan were to sue the doctor if Jennifer acts inappropriately under the Durable Power of Attorney. I can tell you that I have come across this scenario countless times over the course of the past twenty years in practice.

The answer to this dilemma is to create a Revocable Trust and place your assets into the trust. Your Successor Trustee would step in upon your incapacity, and be able to transact business on your trust accounts.

While Durable Powers of Attorney are important estate planning tools, their limitations should be acknowledged and considered as a part of a complete estate plan. If you would like more information on other “Estate Planning Myths” call my office at 334-1141 and ask for our 12 Most Common Estate Planning Myths and Mistakes DVD, which we will send to you free of charge.

©2008 Craig R. Hersch .Learn more at www.sbshlaw.com