The durable power of attorney (DPOA) is often the most important estate planning document a person could execute. My office drafts them as part of a "core" estate plan. It allows you to appoint another person, referred to as your "agent" or "attorney-in-fact" to manage your financial affairs in the event you become disabled or incapacitated. The powers that are given can be limited or quite broad. A power of attorney that is not durable is no longer effective once you become disabled or incapacitated, whereas a "durable" power of attorney continues to be effective after disability or incapacity.
Without a durable power of attorney, a family may have to go court to petition for a guardian or conservator to be appointed to manage the affairs of the incapacitated person. This process takes time, costs money, and could lead to further court involvement if there is disagreement among family members.
Certain provisions of the Massachusetts Uniform Probate Code pertaining to guardians and conservators came into effect on July 1, 2009. Although a durable power of attorney does not become ineffective due to a lapse of time, durable powers of attorney executed under previous Massachusetts law may be invalid.
In addition, attorneys report that clients sometimes have difficulty getting banks and other financial institutions to recognize the authority of an agent under a durable power of attorney. There is no guarantee that a third party, such as a bank or insurance company, will honor a durable power of attorney. A durable power of attorney may also be rejected by a financial institution if it lacks sufficient detail. Many banks and other financial institutions have their own standard power of attorney forms. To avoid problems, my office often recommends contacting the financial institutions with which you have accounts to execute their forms as well as a general durable power of attorney.
Financial institutions may also be more comfortable with revocable living trusts, which I'll write about in another blog post.