Establishing a durable power of attorney can be an important aspect of estate and lifetime planning, especially for aging seniors without immediate family.
When you set up a power of attorney (also called an agent or attorney-in-fact), you are allowing someone to legally act on your behalf. Your agent may have sweeping powers to handle all your business and life affairs, or he or she may be limited to certain activities, such as disposing of key assets like your house or investment real estate. Those powers can be permanent or temporary, and they can be effective immediately or triggered upon a certain event, such as an accident that leaves you incapacitated or the onset of dementia in seniors.
Let’s take a closer look at the powers and scope of a durable power of attorney and why it can be an important aspect of lifetime and estate planning.
Why Establish a Durable Power of Attorney?
There are many reasons to consider setting up a valid durable power of attorney.
If you ever find yourself unable to manage your personal affairs, your agent can act for you rather than a court-appointed guardian or conservator who may be unfamiliar with your wishes and desires. Perhaps the most well-known instance of a court-appointed conservatorship is the case of singer Britney Spears, who was involuntarily placed under conservatorship in 2008.
Other times, people establish a durable power of attorney when they wish to remain anonymous in transactions or for convenience. Your agent can buy and sell real estate properties, for instance, so you do not have to be present to sign documents at closing. Your agent also can manage important financial affairs, including bank accounts, investments, debt obligations, and also complete your tax returns.
If you have substantial monetary assets or multiple investment properties, it might be a good idea to set up a durable power of attorney who is familiar with your investment strategies. Your agent then could begin managing your affairs immediately in case you ever became incapacitated. Without one in place, your business partners or family members would likely have to go to court and have you declared legally incompetent before they could begin managing those assets, a time-consuming process that would leave your key assets untended.
Your durable power of attorney also can make decisions about your healthcare needs if you have a medical emergency and are unable to communicate with doctors and nurses. This can be important for elder seniors struggling with dementia.
Who Should You Choose as Your Durable Power of Attorney?
Oftentimes, people designate a close family member such as a spouse or child to be their agent. You also can designate co-agents if you wish, although it would be wise to have one agent act as a majority in the event that your co-agents have differing opinions. You also can name successor agents if your primary agent is unable to act – you got into a bad car accident together, for instance.
Trust is crucial when setting up a durable power of attorney. The American Bar Association suggests that integrity is far more important than financial acumen or business savvy when naming someone your agent. In other words, be sure you designate an agent whom you know will act with your best interests in mind.
The Bottom Line
Most states allow a durable power of attorney to remain in place until you pass or you revoke the powers. If you are mentally competent, you can revoke your durable power of attorney at any time. You can also freely change your durable power of attorney – and it's a good idea to revisit your choice of power of attorney periodically to ensure that the person or co-agents you’ve designated are still effectively matched up to your needs and goals.
Overriding a durable power of attorney you feel is abusing their position can be extremely difficult – Spears fought her conservatorship in court for years before finally ending the 14-year long arrangement in 2021. Consult with a qualified estate planner to learn more about establishing a durable power of attorney and naming an agent who will act on your behalf.