By Attorney Suzanne Sayward (September 2010)

I often tell my clients that a durable Power of Attorney is their most important estate plan document. A durable Power of Attorney allows someone else to act on your behalf in the event you become incapacitated. The person who creates the Power of Attorney is called the “principal” and the person named to act for the principal is called the “attorney-in-fact.” In most cases, having a durable Power of Attorney will avoid the need for a court appointed guardianship or conservatorship. Here are five important facts to know about Powers of Attorney.

1. In order for a Power of Attorney to remain in effect upon incapacity, it must be ‘durable.’

A Power of Attorney that is not durable becomes void upon the incapacity of the principal. In order for a Power of Attorney to continue to be valid following the incapacity of the principal, the document must specifically state that the Power of Attorney will not be affected by the subsequent disability or incapacity of the principal. This language makes the document a durable Power of Attorney.

2. A Power of Attorney can be ‘springing’ or ‘non-springing.’ A “non-springing” Power of Attorney is one that is in effect immediately. The authority of the attorney-in-fact to act on behalf of the principal is not contingent upon the principal’s incapacity. A “springing” Power of Attorney means the attorney-in-fact has no authority to act under the document until a certain event happens. A springing Power of Attorney will include a provision such as, “my attorney-in-fact shall have no authority to act hereunder unless I am incapacitated as evidenced by a written statement from my physician.” While a springing Power of Attorney can seem like a good way to make sure that your attorney-in-fact does not misuse the document, many financial institutions will not accept a springing Power of Attorney because of concern about liability. It can also be difficult to get a written statement of incapacity from a physician.

3. A Power of Attorney may designate more than one Attorney-in-fact. When someone must assume duties under a Power of Attorney, it can be an overwhelming responsibility; as such, it makes sense in some situations to name co-attorneys-in-fact. For example, in my experience, it is common for parents to name two of their adult children to act as their attorneys-in-fact. This way, the attorneys-in-fact can divide the tasks and help each other as well as mom and dad. Of course, designating co-attorneys-in-fact is not appropriate in every situation – if your co-attorneys-in-fact cannot work well together, then the situation can quickly deteriorate.

4. A Power of Attorney should include specific authorization to make gifts of your assets if you intend that your attorney-in-fact be able to do so. The authority to make gifts on your behalf can be important for estate tax planning and for long term care planning. There are a number of cases in which the courts have determined that gifts made by an attorney-in-fact on behalf of the principal were void where the Power of Attorney did not specifically include the authority to make gifts. These cases primarily reflect challenges made by the IRS to the gifts and many resulted in significant additional taxes.

5. A Power of Attorney ceases to be valid upon the death of the principal. A Power of Attorney is only in effect during the lifetime of the principal and the authority of the attorney-in-fact ceases upon death of the principal.

Attorney Suzanne Sayward is a partner with the Dedham law firm Samuel, Sayward & Baler LLC and served as the 2009 president of the Massachusetts Chapter of the National Academy of Elder Law Attorneys (MassNAELA). For more information, visit www.ssbllc.com.