Why is it a durable power of attorney "Sustainable" and why it is ideal for estate planning
Website design By BotEap.comEnglish common law understood that agents were sometimes needed in business and commerce. The president of Ford Motor Company obviously cannot be everywhere. You need agents to do business. Also, someone who is on vacation out of the country and cannot sign a contract could appoint an agent to sign that all-important piece of paper.
Website design By BotEap.comBut under common law, an agent no longer had the ability to act when the principal he was incapacitated (the “principal” is the person who confers the power). If the director had dementia and couldn’t sign an agreement, his agent couldn’t sign either. His agent could not have greater power than the principal.
Website design By BotEap.comNow if you haven’t figured it out all set, we will all feel the effects of aging, if we’re lucky. The symptoms are well known and do not require explanation. One of those particularly difficult symptoms to cope with is memory loss; the ability to think as clearly as when we were younger. While this is not always disabling, it is during this natural aging process that people often need help. But English common law helped little if someone was in a coma or had dementia.
Website design By BotEap.comHere comes the durable power of attorney.
Website design By BotEap.comBut because defenseless people obviously need the help of an agent more, most jurisdictions now recognize a “durable” power of attorney (abbreviated “DPOA”). A DPOA is “durable” because it is in effect even when the “principal” is mentally incapacitated.
Website design By BotEap.comWhile a nondurable 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 candidate, to act. even if the director lacks legal capacity, or in other words, when that person cannot legally make decisions on his or her own behalf due to a mental disability.
Website design By BotEap.comIn California, a DPOA must have specific words to be “sustainable.” You must declare, as provided in California Probate Code §4124, that: “This power of attorney will become effective in the event of the principal’s disability,” or words to that effect.
Website design By BotEap.comSome benefits of a DPOA
Website design By BotEap.comA DPOA has specific benefits; in fact, I would go even further by stating that almost everyone with a formal estate plan should consider having one. Here are some of the benefits:
- Often one can avoid the guardianship of an adult. A primary benefit of having a DPOA is that it can often substitute for a formal guardianship, which is often an expensive court proceeding that requires ongoing judicial oversight. So if a person has a disability and has a properly worded DPOA, their agent can write checks, manage finances, or take action regarding that person’s estate plan (such as funding a trust) without specific court oversight. .
- It can be quickly effective. A DPOA can take effect immediately, or virtually, without going through lengthy Probate Court procedures.
- Should be accepted in other states. A valid DPOA must be accepted in other states. California has a specific statute, Probate Code §4053, that specifically recognizes valid DPOAs enforced in other states. However, in some states, this may not be the case if the document gives an unauthorized power of attorney in that state. Nevertheless (And this “however” is important!): The IRS does not facilitate the recognition of a power of attorney prepared by an attorney. There are obstacles established in specific regulations of the Treasury. [See, for instance, Treas. Reg. §601.503] and IRS practice makes it difficult for an agent to sign tax forms. [IRS Deskguide (Publication 1514)]. However, a California taxpayer with a valid and properly executed power of attorney should have no problem with the California Franchise Tax Board signing a state tax form.
- DPOAs are flexible. Specific authorizations or “powers” can be added or restricted in the governance agreement. Specific provisions are up to the director.