Dear Jonathan: I am a widow and I have one daughter. A friend of mine has been encouraging me for some time now to give my daughter my power of attorney so she can act for me if necessary. My daughter is currently on all of my bank accounts and has checking writing privileges, so why do I need a power of attorney?

Jonathan Says: Giving your daughter checking writing privileges is very helpful and convenient, but it is also very limited. Right now all your daughter can do is write checks on your behalf. However, if she were named as your agent under a durable power of attorney, not only would she be able to write checks on your behalf, she could act on your behalf in a variety of other areas, including such things as filing your tax return, signing contracts on your behalf, buying or selling stocks or investments and signing closing documents, including a deed, if you wanted to sell your home, which are just a few examples.

If you should ever become disabled where you can no longer act for yourself, without a durable power of attorney, your daughter could do nothing for you other than write checks. Consequently, she would have to petition the probate court in your area to be appointed your conservator before she would be allowed to act for you. Having a durable power of attorney already in place avoids her having to do that.

Dear Jonathan: My spouse and I own everything jointly. Do we also need durable power of attorneys? 

Jonathan Says: Yes, because other than signing checks, if either one of you became disabled, the non-disabled spouse could not act on behalf of the disabled spouse. For example, if you wanted to sell your home, the non-disabled spouse could not sign the closing documents or the deed on behalf of the disabled spouse. So, even though you own everything jointly, you still want to have durable power of attorneys in place allowing the non-disabled spouse to act on behalf of the disabled spouse without invoking a court proceeding.

Dear Jonathan: Are there any disadvantages with durable power of attorneys?

Jonathan Says: Yes. First of all, since the durable power of attorney grants your agent a right of authority over you and your financial matters, if you appoint the wrong person as your agent, he or she could abuse that power. One way to minimize that problem is by setting up the durable power of attorney so that it only takes effect upon your disability. This way it cannot be used until you are in fact disabled.

Although this approach minimizes potential abuses of the durable power of attorney, it also can be a problem if your agent needs to act for you right away. This is because your agent would not be able to act until one or more physicians certify your disability, and there would be some time involved in setting up an appointment and meeting with the doctor. The best way to avoid any abuse of your durable power of attorney is to name someone that you trust to act in your best interests.

Another problem associated with durable power of attorneys is getting third parties to accept them. Even if the durable power of attorney is properly prepared, sometimes third parties such as a bank, the IRS or a title agency may reject it because it doesn’t include certain language they require or they require that their specific form is used. Obviously, that will be a problem if you are already disabled and are not able to sign a new durable power of attorney to comply with a third party’s demands.

Another problem that comes up every once in a while is if someone has not named enough back up agents in the durable power of attorney. For instance, if the agent you have named to act is no longer available to act or refuses to act at the time you become disabled, and you don’t have a backup agent named, then the document ends up being useless and of no effect because there is no one to act on your behalf. Consequently, it is always good practice to name at least one or two back up agents to minimize the possibility of this happening.

Jonathan J. David is a shareholder in the law firm of Foster, Swift, Collins & Smith, PC, 1700 East Beltline, N.E., Grand Rapids, Michigan 49525.

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