Creating a comprehensive estate plan usually requires you to incorporate estate planning documents and strategies that go beyond just a simple Last Will and Testament. One of the most common additions to an estate plan is a power of attorney. In fact, you may find that you create and execute several different powers of attorney during your lifetime. Unfortunately, the fact that a power of attorney is such a common legal document means that people frequently use a power of attorney without a thorough understanding of the power conveyed in the document and/or the limitations of the Agent’s authority granted in the document. For example, do you know when you should use a California durable power of attorney?
Power of Attorney Basics — What Is a Power of Attorney?
A power of attorney, or POA, is a legal document that allows you (referred to as the “principal”) to grant another person (the “Agent”) the legal authority to act on your behalf. The type and extent of the legal authority you grant to an Agent depends on the type of POA you execute.
General vs. Limited Power of Attorney
A general POA grants your Agent almost unlimited power to act on your behalf. This means that your Agent may be able to do things such as withdraw funds from your financial accounts, sell property and assets owned by you, and even enter into contracts in your name while the POA is in effect. Because of the broad authority you grant to an Agent when you execute a general POA it is imperative that you think long and hard before doing so.
A limited POA only grants to your Agent the limited, and specific, authority enumerated in the POA. For example, you might grant an Agent the specific power of attorney to act on your behalf at the closing on the sale of your home because you will be out of the country at the time. Parents of minor children also typically use a limited POA to grant a caregiver the authority to consent to medical care for a child, should it be needed, during the time the child is in the caregivers care.
California Durable Power of Attorney
A traditional power of attorney, whether it is a general or a limited POA, automatically terminates upon the death or incapacity of the Principal. The problem with a traditional POA is that for many people, the entire point of executing a POA is that they want a loved on to have the authority to act for them in the event of their incapacity. If, however, the POA automatically terminates upon the incapacity of the Principal, executing the POA serves no purpose. With that dilemma in mind, the concept of a durable power of attorney evolved. A durable POA is one that survives the incapacity of the Principal.
If you are deciding whether to use a traditional power of attorney or a California durable power of attorney you need to ask yourself one important question: “Do I want the Agent named in my power of attorney to be able to control my finances and/or make decisions on my behalf if I am incapacitated?” Obviously, you need to have the utmost faith and trust in an Agent to give someone that amount of power over you and/or your finances. As such, the decision to execute a durable power of attorney instead of a traditional power of attorney is not a decision that should be made lightly.
Before you execute any power of attorney it is in your best interest to have your California estate planning attorney review the document to ensure that you understand what power you are conveying by executing the document. Likewise, if you need to convey specific authority to someone, make sure you estate planning attorney helps you draft a POA that will accomplish your goal to ensure that the document you execute does what you want it to do.
If you have additional questions or concerns regarding whether a California durable power of attorney is right for your needs, contact theCollins Law Firm by calling (310) 677-9787 to reserve for a Free Estate Planning Workshop.