Back to Estate Planning Basics
Durable Power Of Attorney
A power of attorney is a written document which one person (the principal) uses to empower another person (The attorney-in-fact or "holder" of the power) to act on his or her behalf.
| Principal (competent adult) |
|
Holder of power (attorney-in-fact) |
Powers Which May Be Included
| Non-Tax Powers | Tax-Related Powers | |
| *To buy, sell, or lease assets. | *The power to make gifts to the spouse (to equalize the estate) and to children, grandchildren, etc. (to utilize the annual gift tax exclusions) | |
| *To sue on the principals behalf | *The power to make disclaimer. | |
| *To collect from creditors | *The power to create living trusts to benefit the principal, spouse and heirs | |
| *To refuse life-prolonging procedures | *Then power to complete transfers to a living trust if the principal becomes incompetent. | |
| *To operate the principals business | *The power to join the competent spouse in signing income and gift tax returns. | |
| *The power to exercise special powers of appointment. |
Powers Which Cannot Be Given To Another
*Power to execute a will
*Power to revoke a will
*Power to execute a living will (right to die)
Additional Considerations
Powers of attorney are usually notarized, and those affecting real property may need to be recorded.
A power can be a general power of attorney, which gives the holder all of the powers possessed by the principal. On the other hand, a special power of attorney limits the powers only to those specifically set forth in the document.
Document can be drafted so as to empower the holder currently, or to become effective only in the event the principal becomes incompetent (sometimes called a "springing power")
Note: Significant powers may be granted under a power of attorney. Before using a pre-printed form, legal advice should be obtained.