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It's The Law: Durable Power Of Attorney Can Be Important

Question: My spouse died a few years ago and I am concerned that I will need somebody to take care of my bank accounts if I become sick. My attorney recommends a power of attorney. Can you explain?

Answer: A power of attorney is a very flexible and powerful document. It authorizes another person or entity to act as the principal, to the extent of authorization in the power.

A power of attorney can be quite broad, but statutes limit the authority of the attorney in fact. An attorney in fact cannot confess or authorize a judgment against the principal and also cannot execute a general release on behalf of the principal. An attorney in fact can also not vote in a public election on behalf of the principal or execute or revoke a will, codicil or other document directing disposition of property at the principal's death.

The attorney in fact must be a person who is at least 18 years old and of sound mind, or a financial institution with trust powers and a place of business in Florida.

Unless the power is created as a durable power under Florida Statutes, the attorney in fact's power to act ends when the principal is unable to act. That means, the authority ends with the principal's death or incapacity. A durable power also ends with death, but may extend beyond incapacity. Hence, it is the most frequently used power in connection with estate planning.

A durable power of attorney must be in writing and must be executed with the same formalities as required for conveyance of real property in Florida. The power must specify that it is a durable power and is not affected by subsequent incapacity of the principal, except as provided in Florida Statutes. The power is suspended if anyone starts court proceedings to determine incapacity of the principal, except for provisions in the power authorizing the attorney in fact to make health care decisions for the principal. If the principal is found to lack capacity, a guardian will likely be appointed and the power of attorney remain suspended until court order that the principal's capacity is restored.

A durable power is stronger than a regular power of attorney. By statute, any third party may rely upon the authority granted in a durable power of attorney. In a recent case, the bank allowed an attorney in fact to move $150,000.00 from one of his principal's account to an account in the name of the attorney in fact. The death beneficiary of the original account sued the bank and lost. The court ruled the bank was justified in allowing the attorney in fact to utilize the power as, by statute, an attorney in fact can exercise all powers granted by the principal.

Although court proceedings to determine incapacity and a judicial determination of incapacity suspend operation of a durable power, Florida statutes provide for creation of a power that can only be exercised when a Florida licensed physician signs an affidavit stating the principal lacks capacity to manage property. This springing or contingent power was originally thought to provide greater protection for the principal, because the power originally could only be exercised when it was needed due to incapacity. In practice, it has proven difficult to get a doctor to sign the affidavit, which renders the power of attorney useless. For that reason, most estate planning attorneys rely upon the durable power.

Unless otherwise stated in the durable power, the power applies to any interest in property owned by the principal. That includes real estate, bank accounts, stocks, bonds and contracts. The power can be abused and has been abused by the unscrupulous. That makes it critical that you carefully consider and possibly background research a potential attorney in fact.

Use of a power of attorney in estate planning or other context is often a good idea and can provide needed flexibility and protection for the principal. In some cases, authority of the attorney in fact should be limited to protect the principal. In others, drafting will be more appropriate with a broader brush.

This is not the type of document that should be based on a form from the supply store. You should continue your discussions with your attorney in greater detail and carefully determine how a power of attorney might be of benefit in your particular situation.

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