Durable Power of Attorney For Asset Management
A durable power of attorney can eliminate the need for a conservatorship by providing a means for managing the assets of an incompetent principal. Using a DPA instead of a conservatorship usually reduces legal expenses, and avoids making the principal’s incompetence and financial affairs matters of public record. A DPA can also be used as a backup device when the primary asset management device is a revocable trust, providing a means of managing assets which were not transferred to the trust when the trust was established.
Except for modest restrictions which preclude granting powers to write wills or to make health care decisions, the powers granted to the attorney in fact may be as wide or as narrow as the principal wishes. Provided there is express authorization in the instrument, a principal can even authorize an attorney in fact to make gifts, create trusts, or take other estate planning actions. The power of attorney may be immediately effective or may spring into operation on the incapacity of the principal. The principal can give different powers to different persons, can appoint multiple persons to exercise a power and can provide for successors.
Disadvantages of DPA for Asset Management
There are several disadvantages to DPAs. In the absence of court supervision, there are few safeguards to ensure that the attorney in fact is serving the principal’s wishes or best interests. In addition, instances of intentional misappropriation are not uncommon.
There are also situations in which an attorney in fact may face adverse estate and gift tax consequences as a result of holding a power. For example, if the attorney in fact can exercise the power to make gifts in his or her own favor, the attorney in fact may have a general power of appointment with respect to any property subject to the gift power. This will cause inclusion of the property in the attorney in fact’s taxable estate in the event the attorney in fact dies first.
Scope of DPA Powers
If sufficiently authorized by the instrument, an attorney in fact may be authorized to perform any acts that the principal might perform, except for execution or revocation of a will, and the giving of consent to certain health care decisions. The DPA can grant broad general powers to the attorney in fact, or can limit the power to specific matters.
A DPA can be effective immediately on execution or it can be a “springing” power, coming into effect on the principal’s incapacity or other future event or contingency.Posted by admin | 1 comments