The Durable Power of Attorney--Planning for Incapacity
No one likes to think about becoming incapable of handling their own affairs. Yet, the durable power of attorney has always been an important part of an individual’s estate planning arsenal. This document provides a means for you to appoint another person to handle your financial affairs and manage your assets and property when you are unable to do so yourself. The term “durable” shows your intent that the other person, called an attorney-in-fact, will have authority to act for you even if you are incapacitated.
The durable power of attorney must be in writing and must also be signed by two witnesses. The attorney-in-fact may be a spouse, relative, friend or almost anyone you choose, provided that person is 18 or older and of sound mind. The durable power of attorney is valid from the time you sign it until such time as you revoke it, you are declared incompetent by a court, or upon your death.
The importance of a durable power of attorney becomes evident when you consider the alternatives. If you became incapacitated without a durable power of attorney, a court would have to appoint a guardian to manage your affairs, pay your bills and maintain your property and investments. Guardianship proceedings can be time consuming and expensive and there is no guarantee that the court will appoint the person you would have wanted as guardian. You can easily avoid this situation if you plan and appoint an attorney- in-fact to act on your behalf.
With a well drafted durable power of attorney, your attorney-in-fact will be able to make decisions about your property on your behalf. He or she would be able to sign checks to pay your bills and medical expenses, oversee and direct your investments, sign deeds and enter into contracts on your behalf. Of course you can structure the durable power of attorney to restrict or eliminate any of these powers. That way you can provide for your incapacity without giving up control of your assets. Under no circumstance can an attorney-in-fact change your will, exercise personal services, or vote in any public election on your behalf.
Even if you have set up a revocable trust, the durable power of attorney is an important element of your estate planning. The primary reason most people set up trusts is to avoid probate; however, only assets that are properly transferred into trust ownership will escape probate administration. Therefore, if you become incapacitated and your family discovers that you forgot to transfer shares of stock into the trust, those shares would be subject to probate at the time of your death. If you had executed a power of attorney with specific authority to transfer assets to your trust, your attorney-in-fact could put the stock into trust ownership prior to your death, thereby saving your heirs the time and expense of probate administration.
In 2011, the Florida Legislature passed a revised bill which the Governor signed into law which drastically changed the durable power of attorney in Florida. The law took effect on October 1, 2011 and applies to all durable powers of attorney created after that date. Powers of attorney that were created and signed prior to October 1, 2011, are still valid but are not interpreted the same as the new ones.
Some of the highlights of the new law are:
1. Certain sweeping powers granted to an attorney-in-fact- so-called "superpowers" - require special treatment. One example of a superpower is the ability to make gifts from the principal's funds. To grant an attorney-in-factthe ability to exercise a superpower, that superpower must be specifically mentioned in the durable power of attorney, and that section of the document physically initialed by the principal.
2. If the principal desires that co-attorneys-in-factact only with the knowledge and consent of the others, the durable power of attorney must specifically say so. If this provision is not included in the durable power of attorney, it is assumed that each co-attorney-in-factmay act independently, without the knowledge or consent of the others.
3. The new law also states that banks and financial institutions must honor a photocopy or electronic copy of the signed durable power of attorney. Again this only applies to the new form.
4. The "springing" power of attorney, where the attorney-in-fact only has authority after a doctor certifies that the principal is incapacitated, is abolished. All attorneys-in-fact now have authority to act as soon as the document is executed.
These are only a few of the changes in the law. If you have a power of attorney that is dated prior to October 1, 2011, we recommend that you contact our office at 941-473-2828. Also, please let family members and friends know about this change so that they can also update their estate planning documents.