For many of my clients a durable power of attorney is just as important as a last will and testament. Through a durable power of attorney you can appoint another person to serve as your attorney in fact, someone to step in and manage your financial affairs if you become legally incompetent and therefore unable to act for yourself.
What does the word, durable, mean in this context? Generally powers of attorney are only effective if the person granting it is legally competent at the time the attorney in fact attempts to use it. However, Mississippi law provides that one may make a power of attorney durable or continue to be effective even after disability or incompetence if the power of attorney contains a phrase such as “This power of attorney shall not be affected by subsequent disability or incapacity of the principal or lapse of time” or similar words.
What happens when a person becomes legally incompetent without a durable power of attorney? Assets held in the incompetent person’s name cannot be used until a court appoints a conservator to act for that person, a legal process filed in chancery court that is time consuming, tedious and often very costly. Also, long term care planning opportunities will likely be much more limited through a conservator as compared to those available to an attorney-in-fact under a properly drafted durable power of attorney. This is especially important for long term care planning.
You need to understand that durable powers of attorney are not favorites of the business world. Some brokerage firms will honor only their form durable power of attorney, so even if you have a durable power of attorney, you may want to also execute the form required by your broker.
One word of caution is required.
Because a durable power of attorney grants broad powers to the
attorney-in-fact, it should only be given to someone you completely trust. What
if you have someone you trust but are not ready to deliver your power of
attorney to him or her? You could use a springing durable power of attorney,
which springs into action once you are incompetent. However, banks or other
businesses that you want to rely upon your power of attorney may be hesitant to
honor it without a legal determination of your legal incompetence. To avoid
this possibility, often times my clients ask me to hold their powers of
attorney until they are needed. I am willing to do this at no charge to my
clients if they sign a letter to me clearly outlining what I am to do with
their power of attorney. If you do not have anyone you trust enough to appoint
as your attorney-in-fact, you may want to consider creating a living trust, but
that is a topic for another article. If you would like to discuss this or any
other estate planning topic, call David Dunn in
W. David Dunn © 2004
