A Durable power of attorney for property (POAFP) is a very useful and essential financial and estate planning device. Such powers allow a trusted individual to handle a myriad of financial transactions for the creator of the POAFP. A POAFP can be effective from the moment of its execution, or from the time the creator becomes incapacitated. Whether to use mental incapacity as the trigger to the effectiveness of the power, or to declare the power to be effective upon execution, is a choice that the principal makes at the time of signing.
A POAFP is particularly useful for individuals who do not have a living trust, or where there are assets outside the trust that must be administered or should be placed in trust. A POAFP can include certain special powers that can be quite helpful in achieving estate and tax planning objectives that the principal was not able to implement due to having become mentally incapacitated.
Obviously, under any circumstances, one must be very careful in selecting an individual to become one's agent. Such a person should not only be trustworthy, but experienced and familiar with the type of transactions that he or she may be called upon to carry out for the principal.
In addition, the agent must be aware of the legal guidelines which govern the agent's conduct and be willing to take on the responsibilities of the undertaking, which can be very time consuming. While agents are neither guardians nor trustees, they do have obligations that are very similar, and must maintain accurate financial records of the transactions which they carry out under the power of attorney. Agents must be very careful not to take part in transactions which might be considered self-dealing or which personally benefit the agent at the expense of other heirs.
Powers of attorney for property are a relatively new vehicle and the law is clearly evolving in this area. Any person who is considering either creating a power of attorney, or becoming an agent under a power of attorney should consult with their legal counsel in order to make sure they understand the nature and extent of the particular undertaking. The penalties for the failure to properly carry out their duties and responsibilities can be quite serious. In addition, the consequences to the family of the creator of the power, both in the form of irreparably causing injury to precious family relationships, as well as financial losses can be quite severe.
Virtually every legally competent adult should have a durable power of attorney for property. While not a substitute for a living trust, a POAFP can be used effectively with such a trust to achieve the principal's lifetime and testamentary objectives.