Why a Durable Power of Attorney is "Durable" and Why It’s Great For Estate Planning


English common law understood that agents were sometimes needed in business and commerce. The president of Ford Motor Company, of course, cannot be everywhere. He needs agents to do business. Also, a person who is on vacation abroad and cannot sign a contract can appoint an agent to sign this very important document.

But under common law, an officer no longer had the capacity to act when the main was incapacitated (the 'principal' being the person who bestows the power). If the principal had dementia and could not sign an agreement, his agent could not sign it either. His agent could not have more power than the principal.

Now, if you haven't figured it out, we'll all be feeling the effects of aging – if we're lucky. The symptoms are well known and need no explanation. One of these particularly difficult symptoms to take is memory loss; the ability to think as clearly as when we were younger. While it's not always disabling, it is during this natural aging process that people often need help. But English common law didn't help much if someone was in a coma or had dementia.

Here is the durable power of attorney.

But since the helpless people clearly need an agent's help the most, most jurisdictions now recognize a "durable" power of attorney (abbreviated as "DPOA"). A DPOA is "durable" because it is in effect even when the "principal" is mentally incapable.

While an unsustainable power of attorney simply authorizes the agent to act as long as there is no incapacity, a DPOA solves this problem by allowing a trusted agent, or agent, to act. even if the principal does not have legal capacity – or in other words when that person cannot legally make decisions on their own behalf due to a mental disability.

In California, a DPOA must have specific words to be "sustainable". He must declare, as provided by California Probate Code §4124, that: "This power of attorney will take effect in the event of the principal's incapacity", or words to that effect.

Some advantages of a DPOA

A DPOA has specific advantages; in fact, I would go even further and say that almost anyone who has a formal estate plan should consider having one. Here are some of the benefits:

  • Adult guardianship can often be avoided. One of the main advantages of having a DPOA is that it can often be a substitute for formal guardianship, which is often an expensive legal process requiring ongoing judicial oversight.
    So, if a person is disabled and has a properly drafted DPOA, their attorney may be able to write checks, manage finances, or take action regarding that person's estate plan (such as funding an estate plan). trust) without specific judicial supervision. .
  • It can be quickly effective. A DPOA can be effective immediately, or virtually, without enduring lengthy proceedings in probate court.
  • It should be accepted in other states. A valid DPOA must be accepted in other states. California has a specific law, Probate Code §4053, which specifically recognizes valid DPOAs performed in other states. However, in some states, this may not be the case if the document grants an unauthorized power in that state. However (and this "however" is great!): The IRS does not easily recognize a power of attorney prepared by an attorney. There are barriers set out in specific Treasury regulations (see, for example, Treasury Regulations, §601.503) and IRS practice, making it difficult for an officer to sign tax forms. (IRS Deskguide (Publication 1514)). However, a California taxpayer with a valid and properly executed power of attorney should not have a problem with the California Franchise Tax Board signing on a state tax form.
  • DPOAs are flexible. Specific permissions, or "powers", may be added or restricted in the governance agreement. The specific provisions are the responsibility of the principal.

Of course, not everything is perfect …

While very useful, the DPOA is by no means perfect. A major problem is the possibility of abuse.

While guardianships are lengthy legal proceedings, there is at least judicial oversight. The DPOA lacks oversight and abuse has occurred all too often. While restaurateurs face many legal hurdles, there are no active judicial oversight or "hurdles" for an agent under a DPOA. For example, California requires restaurateurs to provide court-approved accounts of their financial activities. It also requires that restaurateurs be linked. But without a specific court order, there are no such requirements for a mere attorney.

Legal proceedings can be taken, but this is often not practical. During legal proceedings can be instituted to compel (for example) the agent to submit accounts or to revoke the agent's power, this is done too rarely. There is a big difference between a court supervised guardianship and filing an application with the court.

In any event, who will file the petition with the court? Remember: The manager is mentally incapable! Comatose people usually cannot file probate petitions to hold their agents to account!

Of course, there are risks, and they can be dealt with a little (but not completely) with a well-written document and a few common sense precautions. A DPOA might not be for everyone. However, everyone should at least consider a DPOA as part of their estate plan. An effectively written DPOA can “complement” an overall plan and fill in the blanks not covered by trusts and wills.

Warning: The information in this article is not legal advice and its use does not create an attorney-client relationship. Any liability which may arise from your use of or reliance on this article or any link in this article is expressly disclaimed. This article should not be construed as legal advice, and is subject to change without notice, or may include out-of-date or dated information, or information not relevant to your business. jurisdiction. If you need legal services, you should consult a lawyer.

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