The third method of lifetime planning for the incapacitated adult involves establishing a 'durable power of attorney'.
Anyone who has the legal capacity to perform an act can appoint someone else to perform an act for them by using a power of attorney. A power of attorney creates a relationship between one person, who is known as the 'principal', and another person or institution, known as the 'attorney-in-fact'. The attorney-in-fact is authorized by the principal to act on their behalf. The authority is set down in a written document and may be limited, to involve only a few duties, or very broad, to include many duties, (except execute a will). When the attorney-in-fact performs these duties according to the terms of the document, they are legally binding.
Duties of the Attorney In Fact
Some of the duties that an attorney in fact can perform include, but are not limited to; managing the principal's affairs, handling his investments, negotiating property leases, borrowing money, filing tax returns, paying taxes, participating in the operation of a business, having access to safe deposits boxes.
Traditional Power Of Attorney versus Durable Power Of Attorney:
A traditional power of attorney is considered "non-durable". It can't be used to pre plan for the principal's incapacity because the authority of the attorney-in-fact ends when the principal is no longer legally competent to personally perform any acts, or has died. This type of power of attorney is an ineffective planning method for a person whose mental capacities are diminishing, because he will have lost his legal capacity, and this will terminate the power of attorney.
A durable power of attorney, is authorized in all fifty states, and is effective even after the principal is no longer legally competent to personally act. In order for a power of attorney to be 'durable', the document must contain language which might say something like this." this power of attorney shall not be affected by my subsequent disability or incapacity.".
When the principal dies, the authority of the attorney-in-fact in a durable power-of-attorney ends.
Two common types of Durable Power of Attorneys
The first one, which was discussed above, becomes effective as soon as it is executed.
The second type, which is known as a "springing" durable power of attorney, becomes effective when the principal becomes incompetent. Some attorneys will recommend that a doctor and/or a group of trusted friends and relatives would be empowered to determine when power of attorney would "spring" into effect. This springing power is authorized in about two-fifths of the US. In order to be valid, any durable power of attorney must be executed before the principal's incapacity.
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