A durable power of attorney | Mission Viejo: is a legal document that gives someone else the authority to make financial decisions on your behalf if you cannot do so yourself. This can be helpful if you become incapacitated or ill and need someone to help manage your financial matters. The person you designate as your Power of Attorney (also known as your agent-in-fact) will be able to act on your behalf in matters such as managing your finances or handling property transactions.
A durable power of attorney remains in effect even if you become incapacitated, which means your designated representative will still have the authority to make decisions on your behalf. This can be a valuable tool if you want to ensure that someone you trust will have continued access to your affairs even if you cannot make decisions for yourself.
Why should every adult have a Durable Power of Attorney?
Even if you feel healthy, it is still a good idea to have a durable power of attorney in place. If something unexpected happens and you become unable to make decisions for yourself, having a durable power of attorney can save you from recovering from one catastrophe and being cast immediately into another one because your bills, mortgage, etc. haven’t been paid. It can also provide peace of mind for you and your loved ones, knowing that someone you trust has the authority to make decisions on your behalf if needed.
Types of Powers of Attorney:
Durable - survives incapacity
General - authorization of overall property and assets
Limited - authorization over specific assets (e.g., real property power of attorney is limited to only applying to the real property).
Healthcare - (generally referred to as an Advanced Health Care Directive although some continue to call it a Healthcare Power of Attorney.
How does a Power of Attorney become effective?
When creating a Power of Attorney you have the ability to control when it becomes effective. It can either become effective immediately upon signing the document or upon the occurrence of some event in the future and is often referred to as a springing power of attorney because they spring into effect upon a certain occurrence.
Spring vs. Immediately Effective Power of Attorney:
A springing durable power of attorney is a document that becomes effective only upon some future event, which is common if you become incapacitated. This can be helpful if you want to ensure that someone you trust will have the authority to make decisions on your behalf if you cannot do so yourself but does not give them control or authority to manage your assets while you are capable of doing so.
A non-springing power of attorney goes into effect immediately when it is signed. This may be a better option for some people, as it allows the designated representative to start making decisions on your behalf right away.
Neither one is better than the other, it simply depends on what your objectives are and when you need or expect your agent to help you with your financial matters.
What is the difference between a Durable Power of Attorney and an Advance Health Care Directive?
When dealing with multiple types of complex documents it is easy to lose track of all their individual functions. An Advanced Health Care Directive is a document that specifies how you want medical decisions made on your behalf and who can make those decisions if you’re unable to. A power of attorney gives someone else the authority to make financial decisions on your behalf.
How do I Select the Right People to be my Durable Power of Attorney?
When selecting the individuals to be your agents under your Durable Power of attorney, it is essential to choose someone trustworthy. Since they are given broad discretion over your financial affairs, choosing the wrong person can cause as severe problems as not having one at all. It is also a good idea to select more than one agent that way if your initial agent is unavailable or unable to act on your behalf there is someone who can step up to the plate. You should also discuss your wishes with your agents so they know what you want them to do if they need to step in and take over decision-making for you. They'll be responsible for managing all your finances until you can regain the ability to manage them yourself or you die.
Dangers of Not Selecting Good Agents:
If you are a fan of the "Rocky" movies, there is a picture-perfect example of what could go wrong if you select a bad agent under your Durable Power of Attorney. Before leaving for Russia in Rocky 4, the family accountant told Pauly (the brother-in-law) he had some good investment ideas. Pauly thought he was doing "smart business" and wanted to show how valuable he could be, so he named this individual as the agent under an immediately effective Power of Attorney. This person then invested all of the Balboa fortunes in bad deals and lost it all. So when Rocky and Adrian get back from Russia at the beginning of Rocky 5, they soon learn they have lost everything and are broke.
The moral of the story is twofold: (1) creating a Power of Attorney is a serious business that has the potential to immensely help or hurt your family so make sure you get good advice from someone you trust and is experienced in this area (an attorney is a good place to start), (2) Ensure you select the right person to serve as your agent your attorney should be able to help you identify who this person would be.
Trust is essential when choosing your agents, and in this situation, everyone would have been much better off if they had Pauly sought better advice before signing away the keys to the family fortune.