Many people know that a power of attorney is a useful tool in an estate plan. Unfortunately, there are many misconceptions around how and when to use a durable power of attorney. Find out what a DPOA does and doesn’t allow you to do as part of a loved one’s estate.
A Durable Power of Attorney (DPOA) isn’t complicated. However, it is an essential part of your living estate plan. A DPOA names one or more people who have the authority to make financial and legal decisions for you while you are alive. It doesn’t take away your own ability to make choices, but if you ever are not able to do so, the person designated as your power of attorney can step in on your behalf.
Think of it like car keys. You have the keys to the car representing your life. When you create a Durable Power of Attorney, you make a duplicate set of keys and give them to a loved one you trust to drive your car. The two of you can share the driving responsibilities, but when you can’t drive because of your health, your loved one is there to take the wheel.
The most common mistake people make in creating a Durable Power of Attorney, as with any estate planning, is waiting too long to start. People generally assume that they will live a long and healthy life, and be able to handle their own affairs right up to the end. However, you never know when a routine medical procedure or traffic accident could leave you temporarily or even permanently disabled.
That’s when the DPOA comes into play. It can fill the gaps in financial management caused by illness, recovery, or even a lengthy vacation. Anytime you are not able to make the calls and visit the banks yourself, the person designated as your power of attorney can step in to help.
However, if you wait too long to create a DPOA, you could find yourself physically or mentally incapable of making the designation. Without a Durable Power of Attorney in place, your loved one will need to file a petition for Guardianship and Conservatorship with the Florida Probate Court to get permission to make decisions on your behalf. It takes time for the court to hear your family member’s petition and decide if he or she is the right person to have authority over you and your estate. Guardianship is significantly more expensive and invasive of your privacy than having a DPOA in place. By creating a Durable Power of Attorney before you need it, you can protect your own interests, ensure an uninterrupted standard of care, and make it easier for your loved ones to honor your wishes.
Using the car analogy, if you accidentally lose the keys to your car (become incompetent) and have already made a duplicate (the DPOA), then your loved one can simply use that duplicate to take over driving. If you haven’t made duplicates, you will need to call a locksmith (the Florida Probate Court) to create a new set of keys (the Guardianship/Conservatorship). That could leave you stranded until the keys are made.
All too often, designating a Durable Power of Attorney is treated as a badge of honor, recognizing a favored child or close friend for their support, rather than their skill in managing your affairs. If you name the wrong person on your DPOA, you could face mismanagement of your affairs that will cause your accounts to come up short when you need them most. If your power of attorney runs out of money before you run out of medical expenses, it could affect your standard of care in your final days.
In the car example, this is like giving your duplicate car keys to someone with a bad driving record. They may be able to drive, but frequent accidents and traffic tickets mean that your car may not go as far as you hoped.
Many Florida residents work with an estate planning attorney to make an estate plan, including a Durable Power of Attorney, and then put it in a drawer until it is needed. It goes without saying, but if you don’t tell the person you have designated as power of attorney, he or she can’t use that power when the time comes. You should also tell your banks, financial planners, and other companies that the designee may have to work with about the DPOA. You may want to keep a copy of the most recent form on file with them. That way, when your designee tries to exercise their powers under the DPOA, the bank won’t be caught by surprise and temporarily deny them access.
This would be like telling your neighbors or insurance company that your loved one has keys to your car. It isn’t technically necessary, but it will keep your loved one from having to answer a lot of uncomfortable questions when they are seen taking your car for a drive.
Many people believe that a Durable Power of Attorney is all they need to make sure someone is able to make medical decisions for them when they are no longer able to. A DPOA must specifically list the types of actions your designee can take on your behalf. That may or may not include the ability to make medical decisions for you. In many cases, the ability to direct medical care is covered under a separate health care surrogate, rather than the general DPOA. This allows you to divide the tasks of managing your care and finances and assign them to the people best suited to make those decisions on your behalf. If the person you designate as power of attorney can be emotional or you have another person you trust with specialized medical knowledge, you may choose to designate a health care surrogate to make medical decisions for you separate from your power of attorney.
This would be like having a favorite mechanic for your car. You don’t necessarily want to give the mechanic the keys, but they are better equipped to make decisions about how to care for and protect your car, so it will drive longer and more smoothly.
The single biggest mistake people make in using a durable power of attorney is trying to continue using it after the grantee dies. Remember that a Durable Power of Attorney duplicates and assigns the rights you have yourself. Those rights do not continue after you pass away. If your loved one takes a DPOA to the bank after your death, they will likely be turned away. That is because authority over the deceased person’s estate has now transferred to their personal representative or executor. That may be the same person. However, unless there was a living trust in place, the Florida Probate Court will need to issue letters of administration to the estate’s personal representative. It is those letters of authority, and not the DPOA that allows the personal representative to act on the estate’s behalf.
The car analogy gets a little strained here. Since the car represented your life, when that life ends, the car dies. The key you gave to your loved one won’t work any better than yours does. There is still value in the parts of the car -- they can be divided up and sold as scrap -- but holding a key to the car doesn’t give you the right to take it apart and sell it off. For that, you need the title (the Letters of Authority).
When used properly, a Durable Power of Attorney can ensure smooth travel through life, even when you are no longer the one behind the wheel. At Harrison Estate Law, we can help you build a complete estate plan that includes a Durable Power of Attorney, so that your affairs are handled before and after your death. Please contact us online or via email or call 352-559-9828 to schedule a free consultation. If you don’t live close to Gainesville or are sheltering in place, we are happy to set up a phone or Skype call.