Power of Attorney vs. Durable Power of Attorney

Power of Attorney vs. Durable Power of Attorney – Financial Decisions

Power of Attorney vs. Durable Power of Attorney is one of the most important aspects very important to understand when you are considering creating the document authorizing someone to act on your behalf. Durable Power of Attorney was established for the specific purpose of allowing you to name an individual to act for you when you become incapacitated.

The Durable Power of Attorney gives the power to the individual whom you have specified to act for you only when you become incompetent. The Durable Power of Attorney has to remain its authority when you become incapacitated.

In contrast, the more commonly known and used “power of attorney” gives the named individual the right to act on another’s behalf only while the individual is competent. Many people think that if they extend their power of attorney to someone they trust the assignment will apply when they become incompetent. This assumption is not so. When a person becomes incompetent, the power of attorney given by that individual ceases. To establish a “durable” power of attorney, the document needs to state explicitly that it is to continue to be effective in the event of the principle’s disability.

The Durable Power of Attorney is different in each state. As you move from state to state, your Durable Power of Attorney is one of the documents that you should have reviewed by a local estate planning attorney to make sure it complies with that particular state’s legal requirements.

Power of Attorney vs. Durable Power of Attorney – Medical Decisions

The Durable Power of Attorney may consist of two separate legal documents.

• Durable Power of Attorney for Health Care
• Durable General Power of Attorney

Durable Power of Attorney for Health Care:
The primary purpose of the Durable Power of Attorney for Health Care is to appoint someone to make health care decisions for you in the event you are unable to make them for yourself. The Durable Power of Attorney for Health Care applies in all situations in which you are unable to make health care decisions for yourself, not just when you are terminally ill. The Durable Power of Attorney for Health Care you create only becomes effective upon your incapacity. It gives broad powers of health care decisions to whomever you have named as your Durable Power of Attorney for Health Care.

Why is a Durable Power of Attorney for Health Care important:
No one has the legal authority to act for a family member if that individual is unconscious or incompetent unless they have a Power of Attorney to do so. Even parents of children older than 18 cannot authorize emergency treatment for them without a Power of Attorney. If no one has been appointed as your Attorney-in-Fact, it is up to the courts to make decisions on your behalf.

Durable General Power of Attorney
The Durable General Power of Attorney also called the Financial Power of Attorney is the second Durable Power of Attorney and identifies whom you want to assume your Durable Power of Attorney for matters other than health care decisions if you should become incompetent. If you become incapacitated, this document gives another person full legal authority to sign your name on your behalf and manage your finances for all assets not owned by your Revocable Living Trust.

 

In California, there are significant legal aspects related to Power of Attorney (POA) and Durable Power of Attorney (DPOA) that you should be aware of, especially when it comes to both financial and medical decisions. Here’s a more detailed look:

1. Springing Power of Attorney:

A Durable Power of Attorney (DPOA) can be made “springing,” which means it only becomes effective once the principal is deemed incapacitated. The benefit of this setup is that it prevents the agent from having immediate authority. However, proving incapacity can sometimes be tricky, as it usually requires a formal medical certification or a court’s decision. This could delay important actions that the agent might need to take on behalf of the principal.

2. Limitations on Authority:

California law imposes certain restrictions on the powers granted to the agent, even under a DPOA for financial decisions. Some things the agent cannot do include:

• Make or change a will.
• Enter into or dissolve a marriage.
• Vote on behalf of the principal.

The agent has to adhere to a fiduciary duty, meaning they must act in the best interests of the principal. Any transactions that might result in conflicts of interest (such as transfers of property that benefit the agent) are closely scrutinized and could lead to legal challenges.

3. Statutory Form Power of Attorney:

To simplify the process, California provides a Statutory Form Power of Attorney that can be used to create a general or durable POA. While this form is convenient for straightforward cases, it might not be sufficient for more complex estate plans. For those with complicated assets or specific instructions, working with an estate planning attorney is advisable. The statutory form allows individuals to customize the powers they want to grant, covering various aspects such as real estate, banking, and business operations.

4. Revocation of Power of Attorney:

The principal can revoke a Power of Attorney at any time, as long as they are still competent. This must be done in writing, and all relevant parties (like banks, healthcare providers, or anyone relying on the POA) must be notified. If the DPOA has been recorded, for instance, for real estate matters, the revocation also needs to be formally recorded.

5. Conservatorship and Power of Attorney:

If there’s no DPOA in place and the principal becomes incapacitated, a court may appoint a conservator to handle the principal’s affairs. The conservatorship process can be long and expensive, so having a DPOA is often seen as a proactive measure to avoid the court’s involvement. The DPOA allows the named agent to step in immediately to manage both financial and medical decisions without the need for court oversight.

6. Advanced Health Care Directive:

The Durable Power of Attorney for health care decisions is commonly part of the Advanced Health Care Directive. This directive serves two purposes:

• It appoints an agent to make medical decisions on the principal’s behalf.
• It allows the principal to specify their medical treatment preferences, including decisions about end-of-life care, resuscitation, organ donation, and more.

Without this directive, family members might disagree on the principal’s wishes during a medical crisis, leading to complications.

7. Guardianship of Minor Children:

Parents in California can use a DPOA to grant temporary authority to another individual to make decisions for their minor children. This can be especially useful if the parent becomes temporarily unavailable or incapacitated. However, this power is usually limited in scope and time, and it doesn’t replace a formal legal guardianship.

8. Legal Ramifications of Not Having a POA or DPOA:

Without these documents in place, decisions about your finances, healthcare, and personal matters might end up in court, where a judge determines who takes control of these aspects. It could lead to delays, extra costs, and the involvement of people who may not have the principal’s best interests at heart.

9. Specificity is Key:

When drafting a POA or DPOA, specificity is essential. The document should be tailored to the principal’s needs, including any limitations on the agent’s authority. For instance, it’s important to be clear about what financial or medical decisions the agent can make, and under what circumstances. Working with an attorney to draft the document ensures that the principal’s wishes are followed, while also reducing the chances of disputes or misuse of power.

Given the importance and potential complexity of these documents, consulting with a knowledgeable estate planning attorney is crucial to ensure compliance with California laws and to protect the principal’s interests.

 

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