What happens when you’re on a 6-month long trip away from home and you need someone to sell your car? Or, what if you’ve lost consciousness and someone else needs access to your bank accounts to help pay for your care and other bills? These are the types of scenarios where giving someone the power of attorney can help.
The name power of attorney can be confusing because the word attorney is commonly used to mean a lawyer (someone who has a law degree and is licensed to practice law), so much that it’s often used interchangeably. But, the basic meaning of the word attorney is defined as someone who is appointed to act in business and legal affairs for another person. A lawyer can act as an attorney for someone in court as they commonly do, but this requires a law license and usually a law degree. Outside of court, anyone can give someone else the power of attorney to act for their every day affairs.
Durable Power of Attorney
A durable power of attorney is a tool for someone (the principal) to give power to someone else (the agent) to act as attorney in-fact. This tool is used for financial matters only, and someone can choose to have it be effective immediately as soon as it’s signed, or at a later time either because of incapacity (to be determined by doctors) or because of a certain event happening (such as a long military deployment overseas.) With this power, the attorney agent can stand in your shoes to do essentially almost anything you otherwise could have done yourself — they can withdraw or deposit money from your bank account, apply for benefits, and sell property (real property requires some additional requirements), among other things.
As you can imagine, a power of attorney gives the agent a lot of responsibility and power. Whomever you choose to appoint must be someone you trust because they would have access to many of your financial and legal affairs. Fortunately, there are safeguards and allow the principal to limit the powers to certain affairs. For example, it’s possible to give an agent the power only to sell your personal property only, nothing else. A power of attorney can also be changed or revoked anytime by the principal.
Certain organizations such as the IRS or other banks require the principal to use their own form before the power of attorney can be established. Make sure you anticipate all the accounts you’re trying to provide access to, and that the power can be created before it’s too late — that is, before incapacitation.
Why is it called durable?
The reason why it’s called durable has to do with what used to happen to the power of attorney before the laws were rewritten. In the past, when a principal became incapacitated, the power of attorney ceased to exist, essentially defeating its purpose. The power of attorney can now be durable and intact despite incapacitation of the principal.
Can I use a power of attorney after someone’s death to avoid probate?
Even though the power of attorney can live on after a principal’s incapacitation, it can’t live beyond their death. This means unless the principal has something else in place to manage his or her assets, their estate will have to go through the probate process. A power of attorney is not a substitution for a trust or estate planning devices.
Does having a power of attorney take away your power to make decisions for yourself?
No, you still have the power to act, and you can also revoke the agent’s power at any time.
Healthcare Power of Attorney
A healthcare power of attorney works much like a durable power of attorney. The difference is that a healthcare power of attorney gives the agent only the rights to make decisions only related to the principal’s health. The power can start immediately as soon as the document is signed, or later in the case of incapacitation. Also, this power held by the agent can be limited and specified. These decisions include things such as artificial nutrition and hydration, and the decision to prolong life as long as possible.
What happens if you’re incapacitated, and you don’t have a healthcare power of attorney or any other advance directives in place? In New Mexico, surrogacy applies, and the following people in order of priority can make healthcare decisions for you:
- Your spouse, unless you are legally separated, or have filed a petition for divorce, dissolution, annulment, or legal separation
- Someone in a long term relationship with you of an indefinite duration, where they have demonstrated commitment to you in a manner similar to a spouse
- An adult child
- A parent
- An adult brother or sister
A patient, while they have capacity, can disqualify anyone from being a surrogate that makes healthcare decisions. This can be done with a signed writing, or by personally informing the healthcare provider of this wish.
A durable power of attorney and healthcare directives make up just two of the common estate planning devices, and every estate planning scenario requires unique analysis. If you’re interested in any these estate planning tools, please give me a call at (505) 658-4320 for a consultation.