A durable power of attorney is one of the most important estate planning documents you can have. It allows you to appoint someone to act for you (your “agent” or “attorney-in-fact”) if you become incapacitated. Without a power of attorney, your loved ones would not be able to make decisions for you or manage your finances without asking the court to appoint a guardian or conservator, which is an expensive and time-consuming process.
There are many do-it-yourself power of attorney forms available; however, it is a good idea to have an attorney draft the form for you. There are many issues to consider and one size does not fit all.
The agent’s powers
The power of attorney document sets out the agent’s powers. Powers given to an agent typically include buying or selling property, managing a business, paying debts, investing money, engaging in legal proceedings, borrowing money, cashing checks, and collecting debts. They may also include the power to consent to medical treatment, and medical power of attorney are usually done as a separate document. Some powers will not be included unless they are specifically mentioned. This includes the power to make gifts and the power to designate beneficiaries of your insurance policies.
The power to make gifts of your money and property is a particularly important power. If you want to ensure your agent has the authority to do Medicaid planning on your behalf in the event you need to enter a nursing home, then the power of attorney must give the agent the power to modify trusts and make gifts. The wording in a power of attorney can be significant, so it is necessary to consult an attorney.
Springing or immediate
The power of attorney can take effect immediately or it can become effective only once you are disabled, called a “springing” power of attorney. While a springing power seems like a good idea, it can cause delays and extra expense because incapacity will need to be determined. If the power of attorney is springing, it is very important that Louisiana law be followed in specifying the method for determining incapacity, and it must be clearly spelled out in the document.
While it is possible to name more than one person as your agent, this can lead to confusion. If you do have more than one person named, you need to be clear whether both parties need to act together or whether they can each act independently. It might make more sense and be less confusing to name an alternative agent to act in case the first agent is unable to. However, a disadvantage is the potential difficulty in convincing a third party that the original agent is actually not available. If two or more agents are named, with any one able to act alone, then such confusion and potential delay is avoided. This is an important issue that you may want to spend some time discussing with your attorney.
Appointing a curator or guardian
In executing a power of attorney you do not give up your rights to act for yourself, and you may revoke the power of attorney at anytime you want. But what if you become incompetent and cannot care for your person or property but refuse to acknowledge your condition and act in a manner that may harm you or cause a loss of your assets? Your agent cannot force you to change your behavior–you are considered competent until a court says otherwise. In your power of attorney you can nominate a curator (guardian) in case interdiction (guardianship) proceedings become necessary. Including your preference for a curator can allow you to have some say over who will be managing your affairs. Usually, the court decides who will be chosen as a curator, but in most circumstances, the court will abide by your nomination in the durable power of attorney. Upon interdiction, the power of attorney is no longer effective and is revoked as a matter of law.
Executing the power of attorney
To be valid a power of attorney must be executed properly. It is best that the power of attorney be signed by you in the presence of a notary and two witnesses, which makes the document “self proving” and avoids requiring a third party to inquire as to the validity of your signature. It is particularly difficult for your agent to engage in real estate transactions if the document is not signed in this fashion.
Accepting a power of attorney
Even if you do everything exactly right, some banks and other institutions are reluctant to accept a power of attorney. These institutions are afraid of a lawsuit if the power of attorney is no longer valid. Many banks or other financial institutions have their own standard power of attorney forms. To avoid problems, you may want to execute the forms offered by the institutions with which you have accounts. But be careful that you don’t sign a bank’s document that inadvertently restricts a power of attorney’s ability to deal with other assets, and you should check that any documents you sign with a bank match the original power of attorney and do not revoke your own power of attorney. Better yet, have your attorney review the bank’s form.