ESTATE PLANNING: GENERAL DURABLE POWERS OF ATTORNEY

Powers of Attorney for Managing Your Finances, Your Property and Your Affairs
 

Important Terms

A Power of Attorney is a document by which one can delegate power to another person or persons. The person giving a Power of Attorney is the Principal. The person acting for the Principal under the Power of Attorney is called the Agent or the "Attorney in Fact." (Do not be confused by the use of the word "attorney." Neither you nor your Agent needs to be a lawyer.)

If you give a durable Power of Attorney, your Agent can continue to make decisions for you even if you become incapacitated and are no longer able to make responsible decisions for yourself. In order to be durable, Maine law requires language specifying that fact.

When you give a Power of Attorney for finances, you do not lose the power to make your own decisions and to act for yourself as long as you remain competent to do so. You are simply authorizing your Agent to act and make decisions for you. You are sharing power over your finances, your property and your affairs with someone else.

It is also important to note that a Durable Power of Attorney is revocable. As long as you remain competent to do so, you can revoke (or "undo") the powers you gave to another person.

Authority and Duties of an Agent

An Agent is charged with doing what is in the Principal's best interest and using the Principal's money and property only for the Principal's benefit.

A Power of Attorney can grant broad authority to the Agent; that is usually called a general Power of Attorney. A Principal might also give a limited Power of Attorney that typically authorizes a single transaction while not conveying any authority over other property of the Principal.

The powers delegated can include the power to deal with your money and property. Such powers might include the power to pay bills, receive income, deposit and withdraw from your bank accounts and brokerage accounts, buy and sell investments, buy and sell your real estate, borrow money, give mortgages, sign tax returns, open and close your accounts, and other steps to invest and manage your wealth.

A Power of Attorney may include the power to establish your place of residence and to arrange for a home or home care services for you. Powers of Attorney also might include the power to make your health care decisions, but this is best done in an Advance Health Care Directive.

One thing your Agent cannot do for you is to write your Last Will and Testament. And the authority of your Agent ends when you die. (At that point, a Personal Representative is usually appointed by the Probate Court to take control of your assets and administer your estate.)

Gifting Authority and Using Power of Attorney for Asset Preservation Planning

Although a Principal may intend to give a general Power of Attorney, there are still some things an Agent may be unable to accomplish. In Maine, if the Principal wants to permit his or her Agent to make gifts of the Principal's assets to the Agent or to others, that power must be explicit in the Power of Attorney. This makes sense. Since the Agent has a general duty to preserve the Principal's estate and to use it only for the Principal's benefit and objectives, gifts are not permitted unless clearly authorized.

A durable Power of Attorney with gifting powers can be an invaluable tool to provide for your financial management and asset preservation in the event of incapacity. In fact, the creation of a thorough Power of Attorney is often recommended by elder law attorneys whose clients ask what opportunities there are for planning for long-term care needs before they arise.

On the other hand, as the name implies. Powers of Attorney are "powerful" documents. This is especially true for the Power of Attorney including authority for the agent to make gifts, and that power should be included only after your careful consideration.

Choosing the Agent
 

When deciding whether to name a particular individual to serve as your Agent, consider that person's ability to responsibly handle your finances, his or her willingness to serve, and, most important, that person's trustworthiness. Geographic proximity is also helpful but not essential.

You may appoint more than one Agent or, instead, choose a primary Agent and one or more alternates. Multiple Agents may act independently of one another or be required to act together.

Allowing Co-Agents or concurrent Agents to act independently should be considered carefully in the event that the Agents have different agendas or fail to communicate with one another. However, if you trust the individuals, your chosen Agents, enough to appoint them as your Agents, they should be trusted to work together for your best interests.

Effective Date of Power of Attorney
 

Powers of Attorney usually become effective in either of two ways. A Power of Attorney may be effective immediately when it is signed. Or the document may be "springing" and, by its language, only become effective upon the happening of a future event, like the disability or incapacity of the Principal, often as shown by a letter from the treating physician of the Principal.

Requirements for a Valid Power of Attorney in Maine
 

Maine's Power of Attorney statute requires that every durable financial Power of Attorney created on or after September 19, 1997, include specific language clearly explaining the rights of both the Principal and the Agent. The notice to the Principal reminds you that the powers being given to an Agent are broad. The notice to the Agent warns that the Agent is under a legal duty to use the Principal's money and property only on the Principal's behalf. If the exact statutory wording is not used, the document is not legally effective.

Maine law requires that a Power of Attorney for finances be signed by the Principal in front of a notary public or an attorney at law. Maine law does not require that a Power of Attorney for finances be witnessed. However, we recommend that the Power of Attorney be executed in front of two witnesses and a notary public in the event that the Agent ever needs to use the document in a state that has these execution requirements.