Powers of Attorney
In its simplest form, a power of attorney is a document in which you (the principal) designate to an agent (the attorney-in-fact) the power to handle and manage affairs in the principal’s name and stead. The attorney-in-fact is a fiduciary, meaning that when he or she acts in that capacity, he or she is charged with acting not in his or her own best interest, but rather in the best interests of the principal. When the attorney-in-fact’s actions are in opposition to the best interests of the principal, the attorney-in-fact is breaching his or her fiduciary duty to the principal, and may be held liable for his or her actions. Powers of attorney (POA) can be limited or specific, general or durable.
In estate planning, having a durable power of attorney ensures you will have someone appointed to make financial and other decisions for you in the event you become incapacitated. Absent the appropriate language, a power of attorney terminates upon the principal’s incapacity. A durable power of attorney provides additional protection by ensuring that even if the principal becomes incapacitated, he or she will have someone to carry out his or her financial affairs, like paying bills, dealing with property, filing taxes. Durable powers of attorney are another part of the lifetime piece of estate planning since the powers therein cease upon the principal’s death (at that point another fiduciary – the executor or administrator – takes over). If you become incapacitated, not having a durable power of attorney will require a court proceeding to have a guardian appointed for you to manage your financial affairs. This can be a costly and time-consuming process that can be completely eliminated by creating a comprehensive estate plan that includes a durable power of attorney.
As with any document in which you appoint someone to act on your behalf, the selection of the agent is important. Sodoma Law’s Estate Planning Group can help you weigh your options in selecting an agent.
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