The Durable Power of Attorney is traditionally one of the basic documents executed when undertaking your estate planning, creating a mechanism to handle your financial affairs prior to your death.  However, because of the broad powers granted in it, you should analyze the associated risks and benefits before signing one.  In some circumstances, you are better off without it.

First, what is a “power of attorney”?  Through a power of attorney, you designate the person or persons (your “agent”) who you are legally authorizing to handle your affairs.  The designation may be limited in duration or in scope.

By designating a power of attorney as “durable” (and incorporating the appropriate language), the authority will remain in place even if you become mentally incompetent.  Therein lies the value of this document in estate planning – it creates an easy means for someone to be appointed to manage your financial affairs should you become unable to do so.  For maximum usefulness, the durable power of attorney should have no limitations or restrictions thereby allowing your agent to handle whatever may arise, whether anticipated or not.

But such broad powers are susceptible to abuse by a designated agent.  Once you deliver a validly-executed Durable Power of Attorney to your agent, you run the risk that your agent may perform acts which you do not approve or which may not be to your benefit.  You may be able to recover any funds improperly spent by your agent.  However, you not only run the risk that your agent may be judgment-proof (e.g., has no collectable assets) but also incur the costs of attorney fees to collect such funds.

If you lose your mental competency prior to executing a durable power of attorney, a court-appointed guardianship may then be the only recourse available for someone looking to oversee your affairs.  A guardianship proceeding can be both costly and time-consuming in comparison to the execution of a durable power of attorney yet both achieve the same results.

A guardianship will also require that the court first declare that you are not mentally competent to handle your affairs – a declaration which can be an emotionally unbearable consequence for many families.

In most instances, the durable power of attorney will be your best option, but the risks should first be understood.  The estate planning attorneys of Bogin, Munns  Munns are glad to consult with you on this and other matters when arranging your estate planning.

John Wright is a corporate attorney with Bogin, Munns, & Munns, P.A., a full service law firm with offices in Orlando, Clermont, Kissimmee, Deltona, Daytona Beach, Ocala, Melbourne, Gainesville, and Leesburg, Florida.  Mr. Wright works out of the Melbourne and Kissimmee offices of the firm and welcomes questions and comments regarding the above and can be reached at jwright@boginmunns.com.

NO LEGAL ADVICE: This blog entry is not intended as legal advice nor should you consider it as such. It is intended only as general information.  You should not act upon this information without retaining professional legal counsel. Please keep in mind that merely subscribing to or reading this blog or otherwise contacting Bogin Munns & Munns, P.A. in the manner that you have will not establish an attorney-client relationship with our firm. Bogin Munns & Munns, P.A. cannot represent you until the firm knows there would not be a conflict of interest and the firm determines that it is otherwise able to accept the engagement. The engagement would also be confirmed by a written agreement.

Trackback URI | Comments RSS