Nearly every estate plan will include two versions of the same indispensable document – the durable power of attorney, or DPA, for property decisions and for health care decisions.
The durable power of attorney allows a person to delegate decision making authority to another person either upon the event of his or her incapacity or immediately. A DPA is essential to effective end of life planning. It will give a trusted friend or loved one the legal power to make decisions on your behalf when you’re not able to.
Historically, a power of attorney was a contract made between an agent and a principal, and accordingly, could only be made while the principal had the requisite capacity to do so. Therefore, if a person who previously had granted a power of attorney subsequently lost her capacity to grant such power, for example, because of a coma or advanced dementia, the power would no longer be valid. This made powers of attorney difficult to use in estate planning because of their fragile nature.
In response, all fifty states have established by statute the ability to create “durable” powers of attorney. Here, the word durable refers to the ability of the power to remain effective after the principal has lost the capacity to contract. Now, a power granted while a principal was of sound mind and health can remain effective during the time when it is likely needed most. Of course, the power will still expire upon the death of the principal.
Typically, two durable powers of attorney are used in an estate plan: a DPA for property decisions and a DPA for health care decisions. The former allows the agent to make property decisions, such as when and to whom to sell real estate and securities, whether or not to mortgage property or otherwise borrow money and to file tax returns. The latter is used to allow the agent to make healthcare decisions about the principal after his or her incapacity. Either type of power can be structured to take effect immediately after its signing or to “spring” into effect upon the incapacity of the principal.
Do you have a durable power of attorney or would you like yours reviewed? Contact our office at 816-561-5000 or send us a message through the form below.
*This post was originally published on March 15, 2013
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