Durable Powers of Attorney

For Financial Affairs

What is a durable power of attorney for financial affairs? We have many inquiries in our office regarding durable powers of attorney, what they are, and how they work. Our financial durable power of attorney is entitled “Durable Power of Attorney for Management of Property and Personal Affairs“.

This is a legal document which is prepared for and signed by one person (the principal), who authorizes another person (the agent) to act on the principal’s behalf regarding financial decisions. It allows a person to plan for the care and control of his or her personal and real property in the event he or she becomes incapacitated. The attorney in fact under the durable power of attorney is often the same person as the trustee under a revocable living trust. The trustee has control of assets in the trust in the event of the incapacity of the trustee. The agent under the durable power of attorney has control of certain assets outside of the trust. These two documents have complementing language to allow for funding of the trust, amendments to the trust, etc., by the attorney in fact.

Specific Language needed: Proper, specific language is required in the durable power of attorney so that the agent may be authorized to handle certain important issues. For instance, specific language is required by title insurance companies to allow for the transfer of real property. Clients have come to our office with “form document” powers of attorney that they purchased at an office supply store or downloaded from the Internet. While these documents legally authorize persons to act on another’s behalf, there are certain things a traditional or standard power of attorney may not address. In fact, the law provides that there are certain matters an agent cannot handle unless there is specific wording in the document which empowers them to do so. Such matters include the power to make gifts and the power to remove and/or add assets to a trust. The language authorizing “gifting” can be of significant importance and required to help qualify someone for Medi-Cal under the state pay down regulations.

What is a Conservatorship? Without a proper power of attorney, the principal’s family may later have to resort to a conservatorship proceeding in probate court to obtain authority to handle financial and personal affairs of their loved one. California law provides a procedure to allow someone to handle his or her financial matters if a person becomes so incapacitated that the person is unable to feed or cloth himself or herself, or look after his or her financial affairs. This is a complex, costly, and time consuming process. A conservator of the person is needed when the individual is unable to take care of his or her basic needs such as feeding himself or herself, clothing himself or herself, etc. A conservator of the estate is needed if the person is unable to manage his or her assets or resist fraud or undue influence. The conservator of the estate receives an annual fee upon court approval, of up to 1.5% per year, and attorney fees can amount to $2,000 to $5,000 to establish a conservatorship, with ongoing fees for required legal work. In addition, the person nominated as conservator may not be the person the conservatee would normally choose.