Durable Power of Attorney
Acceptance of the Durable Power of Attorney
The Sound-of-Mind Requirement
Options of Effectiveness
Non-Transferrable Powers
Revocation of a Durable Power of Attorney
Forms for granting Power of Attorney
Formalities
Acceptance of the Durable Power of Attorney
With a durable power of attorney one (called the principal) grants someone else (called attorney-in-fact or agent) the legal authority to act on the principal’s behalf and thus to manage his practical financial tasks of daily life. That could simply be paying bills, or dealing with insurances or the IRS if a tax return is due.
If done in the proper way, the power of attorney is widely accepted. Banks, insurance companies and other institutions are used to see those documents and they can accept a valid copy of the power of attorney without the risk of being sued as long as they are in good faith. If an institution does not accept a valid power of attorney the attorney-in-fact may get a court order and the respective third person is liable for the attorney's fees incurred in an action or proceeding (California Probate Code sec. 4406).
The Sound-of-Mind Requirement
Everyone over the age of 18 (adult) who is sound of mind can create a durable power of attorney in California. The sound-of-mind requirement underlines the importance of creating a durable power of attorney as long as you are mentally fit. In terms of financial capacity one is deemed in good mental state as long as he can understand the consequences of financial decisions, e.g. responsibilities, risks and benefits of a financial transaction. Once a person has lost the mental capacity it is to late: a durable power of attorney may not be created any more.
Options of Effectiveness
There are two basic concepts for the effectiveness of a durable power of attorney. You can either make it effective immediately or alternatively you can make it effective under the condition that a certain physician establishes the status of incapacitation. In the latter the durable power of attorney will only take effect if the designated physician declares you mentally incapacitated (so called “springing durable power of attorney”). You can also stipulate that the status of incapacity has to be determined by two doctors.
There are advantages and drawbacks for both options. As always the right choice depends on your personal circumstances.
Immediate effectiveness is mostly a good thing if there is a person in your life whom you trust without reservation. As long as you keep your mental competence both your designated agent and you self are able to do business for you. Of course the trusted agent will only act on your behalf if you allow him or her to do so. A good example for the usefulness of such a durable power of attorney is a situation where you suffer from a severe illness, that consumes the energy to take care of the day-to-day financial duties, but are still mentally fit. In this case your agent would be able to act on your behalf, thus assisting you to overcome the illness.
On the other hand a springing durable power of attorney has the advantage that you don’t have to trust somebody as long as you’re mentally competent. But there is a major drawback. Because the document only becomes effective if the designated doctor determines incapacitation, the agent cannot act on your behalf until he has received the according statement from the doctor. Obtaining such a statement can sometimes be time-consuming. Thus if an urgent decision has to be made the agent will not receive the empowerment in time.
A diligent estate planning lawyer will consult you on both options and help you to decide which one is right for you.
Non-Transferrable Powers
Generally the principal can grant a wide authorization to the attorney-in-fact, that allows him to act on the behalf of the principal in nearly every area of life. But there are a few exemptions for very personal acts. The following acts cannot be delegated to an attorney-in-fact:
A durable power of attorney can generally be revoked by the declarer as long as he lives and is sound of mind. The agent and all institutions the agent has been dealing with must then be informed of the revocation. With the revocation the legal authority of the agent ceases to exist. Also the power of attorney ends when the designated agent is no longer available or if the principal dies.
Spouses in California have to be aware that there is an important automatic legal mechanism that can render a durable power of attorney invalid: Upon divorce a spouse who has been the agent of the other spouse under a durable power of attorney looses his authority to act on behalf of the spouse immediately (For further reference see California Probate Code Sec. 4154(a). In this case a new power of attorney should be set up.
Being a Californian estate planning attorney, I also recommend to revoke and redraft a power of attorney when you move to another state. This ensures that the power of attorney is consistent with the new applicable state law.
Forms for granting Power of Attorney
The best way to prepare a power of attorney is to use a form. There are many forms available on the internet. Not all of the offered forms come for free but if you search a little bit, you will find the right form for you.
You should make sure to use a form that has been drafted according to the applicable state law, because many states have compulsory statutory regulations that have to be followed. A conflict between your power of attorney and the applicable state law may render the power of attorney invalid.
In California there is even a statutory form. In section 4401 of the California Probate Code the lawgiver has provided the exact wording of a valid power of attorney for persons that live in California. The Californian Form is not very detailed as far as the powers of the agent are concerned. Instead it provides the option to grant power of attorney in 13 different fields. These fields are specified in an unusual clearness in within the sections 4451-4463 of the Californian Probate Code. Unless explicitly stated the Californian statutory power of attorney becomes effective immediately.
The statutory form can be downloaded free of charge from the Sacramento Public Law Library. However there is no legal obligation to use this form. Other wordings can be used as well as long as they are consistent with the California Probate Code.
Formalities
In California the document with the power of attorney must be signed in front of a notary public. The notary will check your identity, witness your signature and seal the document using a seal stamp.
If the power of attorney entitles your agent to dispose of your real estate, the document must be recorded in the county recorder’s office in order to grant the power over real estate. Recording has to be done in the office(s) where real estate is located. The reason for this is to disclose the power of attorney to all interested parties, that may engage in a real estate transaction regarding property of the principal.
Some books recommend to revoke and restate a durable power of attorney every five to seven years. The only reason for this is to avoid that somebody might doubt the validity of an old document. Legally a durable power of attorney lasts as long as it is determined in the document, usually until you or the designated agent die.
The Sound-of-Mind Requirement
Options of Effectiveness
Non-Transferrable Powers
Revocation of a Durable Power of Attorney
Forms for granting Power of Attorney
Formalities
Acceptance of the Durable Power of Attorney
With a durable power of attorney one (called the principal) grants someone else (called attorney-in-fact or agent) the legal authority to act on the principal’s behalf and thus to manage his practical financial tasks of daily life. That could simply be paying bills, or dealing with insurances or the IRS if a tax return is due.
If done in the proper way, the power of attorney is widely accepted. Banks, insurance companies and other institutions are used to see those documents and they can accept a valid copy of the power of attorney without the risk of being sued as long as they are in good faith. If an institution does not accept a valid power of attorney the attorney-in-fact may get a court order and the respective third person is liable for the attorney's fees incurred in an action or proceeding (California Probate Code sec. 4406).
The Sound-of-Mind Requirement
Everyone over the age of 18 (adult) who is sound of mind can create a durable power of attorney in California. The sound-of-mind requirement underlines the importance of creating a durable power of attorney as long as you are mentally fit. In terms of financial capacity one is deemed in good mental state as long as he can understand the consequences of financial decisions, e.g. responsibilities, risks and benefits of a financial transaction. Once a person has lost the mental capacity it is to late: a durable power of attorney may not be created any more.
Options of Effectiveness
There are two basic concepts for the effectiveness of a durable power of attorney. You can either make it effective immediately or alternatively you can make it effective under the condition that a certain physician establishes the status of incapacitation. In the latter the durable power of attorney will only take effect if the designated physician declares you mentally incapacitated (so called “springing durable power of attorney”). You can also stipulate that the status of incapacity has to be determined by two doctors.
There are advantages and drawbacks for both options. As always the right choice depends on your personal circumstances.
Immediate effectiveness is mostly a good thing if there is a person in your life whom you trust without reservation. As long as you keep your mental competence both your designated agent and you self are able to do business for you. Of course the trusted agent will only act on your behalf if you allow him or her to do so. A good example for the usefulness of such a durable power of attorney is a situation where you suffer from a severe illness, that consumes the energy to take care of the day-to-day financial duties, but are still mentally fit. In this case your agent would be able to act on your behalf, thus assisting you to overcome the illness.
On the other hand a springing durable power of attorney has the advantage that you don’t have to trust somebody as long as you’re mentally competent. But there is a major drawback. Because the document only becomes effective if the designated doctor determines incapacitation, the agent cannot act on your behalf until he has received the according statement from the doctor. Obtaining such a statement can sometimes be time-consuming. Thus if an urgent decision has to be made the agent will not receive the empowerment in time.
A diligent estate planning lawyer will consult you on both options and help you to decide which one is right for you.
Non-Transferrable Powers
Generally the principal can grant a wide authorization to the attorney-in-fact, that allows him to act on the behalf of the principal in nearly every area of life. But there are a few exemptions for very personal acts. The following acts cannot be delegated to an attorney-in-fact:
- Medical decisions (for severe medical conditions you can plan ahead with an advanced health care directive, see the respective chapter).
- Creating a last will
- Marriage
- Adoption
- Voting in public elections
- Create, modify, or revoke a trust.
- Fund with the principal's property a trust not created by the principal or a person authorized to create a trust on behalf of the principal.
- Make or revoke a gift of the principal's property in trust or otherwise.
- Exercise the right to make a disclaimer on behalf of the principal (there is an exemption for court orders).
- Create or change survivorship interests in the principal's property or in property in which the principal may have an interest.
- Designate or change the designation of beneficiaries to receive any property, benefit, or contract right on the principal's death.
- Make a loan to the attorney-in-fact.
A durable power of attorney can generally be revoked by the declarer as long as he lives and is sound of mind. The agent and all institutions the agent has been dealing with must then be informed of the revocation. With the revocation the legal authority of the agent ceases to exist. Also the power of attorney ends when the designated agent is no longer available or if the principal dies.
Spouses in California have to be aware that there is an important automatic legal mechanism that can render a durable power of attorney invalid: Upon divorce a spouse who has been the agent of the other spouse under a durable power of attorney looses his authority to act on behalf of the spouse immediately (For further reference see California Probate Code Sec. 4154(a). In this case a new power of attorney should be set up.
Being a Californian estate planning attorney, I also recommend to revoke and redraft a power of attorney when you move to another state. This ensures that the power of attorney is consistent with the new applicable state law.
Forms for granting Power of Attorney
The best way to prepare a power of attorney is to use a form. There are many forms available on the internet. Not all of the offered forms come for free but if you search a little bit, you will find the right form for you.
You should make sure to use a form that has been drafted according to the applicable state law, because many states have compulsory statutory regulations that have to be followed. A conflict between your power of attorney and the applicable state law may render the power of attorney invalid.
In California there is even a statutory form. In section 4401 of the California Probate Code the lawgiver has provided the exact wording of a valid power of attorney for persons that live in California. The Californian Form is not very detailed as far as the powers of the agent are concerned. Instead it provides the option to grant power of attorney in 13 different fields. These fields are specified in an unusual clearness in within the sections 4451-4463 of the Californian Probate Code. Unless explicitly stated the Californian statutory power of attorney becomes effective immediately.
The statutory form can be downloaded free of charge from the Sacramento Public Law Library. However there is no legal obligation to use this form. Other wordings can be used as well as long as they are consistent with the California Probate Code.
Formalities
In California the document with the power of attorney must be signed in front of a notary public. The notary will check your identity, witness your signature and seal the document using a seal stamp.
If the power of attorney entitles your agent to dispose of your real estate, the document must be recorded in the county recorder’s office in order to grant the power over real estate. Recording has to be done in the office(s) where real estate is located. The reason for this is to disclose the power of attorney to all interested parties, that may engage in a real estate transaction regarding property of the principal.
Some books recommend to revoke and restate a durable power of attorney every five to seven years. The only reason for this is to avoid that somebody might doubt the validity of an old document. Legally a durable power of attorney lasts as long as it is determined in the document, usually until you or the designated agent die.
