The primary function of your estate plan is to give clear directions as to who will manage your financial affairs and the powers bestowed on that person to make financial decisions for you in the event that you’re incapacitated. Executing a Durable Power of Attorney is an integral tool in the overall plan to preserve your financial integrity. This document can also serve to make sure your personal wishes are upheld when you’re unable to voice your opinion.
There are many advantages to a Durable Power of Attorney:
- they are relatively simple and economical to create (as opposed to a conservatorship)
- they can give an appointee the power to create or fund trusts in the future
- they can be created and put into effect quickly
- they are flexible in scope
A durable power of attorney can have an unlimited duration, but at the same time it can allow for a nominee to manage the principal’s affairs on a trial basis. No court approval or supervision is required, and it does not require a transfer of title in any property.
In some cases, a durable power of attorney can create disadvantages. To be effective, third parties (generally financial institutions) must accept the authorization as valid – many require authorization on their own pre-printed forms. An experienced attorney should be able to foresee and deal with this issue at the time the estate plan is created.
Another issue that often arises is that there is very little supervision of the agent or nominee to whom power of attorney is granted. No court supervision is required, and the agent is not required to make an accounting of his or her actions. Finally, the principal still retains full capacity to act, sometimes to his or her detriment. A durable power of attorney will not, for example, prevent the principal from selling a house or spending extravagant sums of money. In such instances, a conservatorship may be necessary.