Powers of attorney are extremely useful estate planning tools, and it is important to understand what they can and cannot do. Basically, a “power of attorney” is an authorization for someone to act for you in one fashion or another. The dictionary says that the word “attorney” refers to someone authorized to represent another. “Attorneys at law” have special licenses from the State to represent others in legal situations. “Attorneys in fact” are persons whom you name to represent you in more limited circumstances. For example, if you were selling your home and the closing was scheduled to take place on a date when you were taking a well-deserved vacation, you could authorize your brother-in-law to sign the deed by giving him a power of attorney that said he could sign deeds for you. In the legal document, your brother-in-law might be referred to as your “attorney in fact,” even though he is not a licensed attorney. Some power of attorney documents simply would simply refer to him as your “agent.” Powers of attorney can be limited to specific situations or specific time periods, as you might want to do with your brother-in-law, or they can be general and unlimited in duration, as might be the case if you wanted to give your spouse unrestricted authority to act on your behalf. They can even be conditional, for example, giving an adult child authority to act on your behalf only if you become incapacitated. For the most part, they are always revocable in case you change your mind.
The word “durable” in most California powers of attorney refers to a California law adopted several years ago that says that if the right language is used in a power of attorney, they remain valid even though the person signing the document becomes incapacitated. Without the word “durable” and the required legalese, a power of attorney would become void if the signer became incapacitated. Since the purpose of a power of attorney is often to facilitate assistance during periods of physical or mental incapacity, you should make sure that the forms you use have the required terminology. If you signed a power of attorney before that change in the law or perhaps in a state that did not have a law similar to that in California, your power of attorney might become ineffective if you become incapacitated.
There are a couple of practical limitations on the use of durable general powers of attorney. For example, although you may have a perfectly drafted and properly signed power of attorney, there is generally no law that requires a third party to honor it. For example, if you give a power of attorney to your son, and your son attempts to use it to take possession of a bank account, even for purposes you approve, like transferring the account into your trust, the bank manager may be reluctant to honor it, unless he or she has additional information that it is valid document and will be used for honorable purposes. As you might imagine, persons seeking to perpetrate fraud have, from time to time, attempted to use a power of attorney to achieve their illegal objectives. If you intend for the person named in your power of attorney to be able to act on your behalf at a particular bank, you may want, if possible, to contact the bank beforehand to explain what will be happening.
Another limitation is that a general power of attorney usually cannot be used with respect to assets held in a living trust. There are some exceptions to this, but the duties of a trustee are considered to be “nondelegable,” so a trustee will not, in most cases, be able to authorize someone sign documents on behalf of the trust.
A “health care power of attorney” is a document in which you give someone authority to make health care decisions for you if you are unable to do so. These forms generally include a statement of the level of treatment that you want your agent to follow, such as, “Keep me alive no matter what just in case there is a cure for my disease while I am in a coma,” or, “Don’t authorize major medical procedures unless there is a pretty good chance that I will survive and live a comfortable life.” Actually, the terminology is a little more formal than that. After all, the documents are drafted by attorneys, but these examples show the type of instructions you can put in a health care power of attorney.
If you are seeing an attorney for estate planning, you should expect to have both general and health care powers of attorney discussed and probably prepared for you, in addition to a will or trust or other legal documents. While you might never need to use a power of attorney, it is better to have one and not need it than not to have one and need it.