In California, a durable power of attorney for property management, also called a financial power of attorney, is a way for you to arrange for someone to manage your personal financial affairs if you become unable to do that on your own. Depending on the extent of the powers provided, a durable power of attorney may also be used to avoid a California probate, probate court and help minimize estate tax. An estate attorney should be consulted to be sure the document provides the terms you desire.
If you become incapacitated and unable to make decisions for yourself, the durable power of attorney avoids the messy alternative of a court proceeding. Your spouse, closest relatives, or someone else who cares for you will have to ask a court for authority over some or all of your financial affairs. Without the durable power of attorney, a California probate attorney may be required to obtain a conservatorship.
A durable power of attorney can be written so that it goes into effect immediately as soon as you sign it. Many of my estate planning clients have a durable power of attorney for each other in case something happens to one of them or for when one spouse is away. As an estate attorney, I often draft a “durable” power of attorney because if I don’t, it will automatically end if you later become incapacitated; my document “endures” my client’s incapacity.
My clients, some of whom live in Los Angeles County, Santa Barbara County, Orange County or Ventura County, specify that they do not want the power of attorney to go into effect unless a doctor certifies that they have become incapacitated. This is called a “springing” durable power of attorney. Its purpose is to enable you to keep control over your affairs unless and until you become incapacitated, when it springs into effect. I don’t like them as much as those which become immediately effective because it may be difficult to obtain a written medical opinion concerning your incapacity.
When you create and sign a durable power of attorney, you give another person legal authority to act on your behalf. In California, this person is called your attorney-in-fact.
Commonly, people want their attorney-in-fact to “step into their shoes” and give their attorney-in-fact broad power to handle all of their finances and property. But you can give your attorney-in-fact as much or as little power as you wish. You may want to give your attorney-in-fact authority to do some or all of the following:
file and pay your taxes
operate your small business
manage your retirement accounts
hire someone to represent you in court
transfer property to a trust you previously created
buy and sell insurance policies and annuities for you
invest your money in stocks, bonds and mutual funds
claim property you inherit or are otherwise entitled to
handle transactions with banks and other financial institutions
collect Social Security, Medicare or other government benefits
use your assets to pay your everyday expenses and those of your family, and
buy, sell, maintain, pay taxes on, and mortgage real estate and other property.
The attorney-in-fact is required to avoid conflicts of interest, maintain accurate records, act in your best interests, and keep your property separate from his or hers.
To create a legally valid durable power of attorney, all you need to do is engage a California estate attorney if you live in California.
Some banks and brokerage companies have their own durable power of attorney forms. If you want your attorney-in-fact to easily work with these institutions, you may need to prepare two (or more) durable powers of attorney: forms provided by the institutions with which you do business and the form which I prepare for my estate planning clients.
You must sign the document in front of a notary public and since I am a notary, that is easy for my tax clients. No witnesses are necessary.
Your durable power of attorney automatically ends at your death. That means that you can’t give your attorney-in-fact authority to handle things after your death, such as making funeral or burial arrangements, paying your debts or transferring your property to the people who inherit it. If you want your attorney-in-fact to have authority to wind up your affairs after your death, use a will to name that person as your executor or a living trust to name that person as your successor trustee.
Your durable power of attorney ends if:
You get a divorce. In California, your ex-spouse’s authority at your attorney-in-fact is not automatically terminated; if you want to end your ex-spouse’s authority, you have to revoke your existing power of attorney. Consequently, you ought to make a new durable power of attorney as soon as you file for divorce.
A court invalidates your document. A court may declare your California durable power of attorney invalid if the court concludes that you were not mentally competent when you signed it, or that you were the victim of undue influence or fraud.
You revoke it. As long as you are mentally competent, you can revoke a durable power of attorney at any time.
No attorney-in-fact is available. To avoid this problem, I recommend to all of my clients that they name at least two alternate attorneys-in-fact in their document.
Call an estate attorney who knows California probate law and who can help you with this and other estate planning needs. Call Mitchell A. Port at (310) 559-5259.