English common law understood that agents were sometimes needed in business and commerce. The president of Ford Motor Company, obviously, cannot be everywhere. He needs agents to conduct business. Also, someone who is on vacation out of the country and cannot sign a contract might appoint an agent to sign that all-important paper.
But under common law, an agent no longer had the ability to act when the principal was incapacitated (the "principal" being the person who confers the power). If the principal had dementia and could not sign an agreement, his agent could not sign either. His agent could have no greater power than the principal.
Now, if you haven't figured this out all ready, we will all feel the effects of aging -- if we are lucky. The symptoms are well known and do not require explanation. One of those symptoms particularly hard to take is the loss of memory; the ability to think as clearly as when we were younger. While this is not always disabling it is during this natural aging process that people often need help. But the English common law helped little if someone was in a coma, or had dementia.
Here Comes the Durable Power of Attorney.
But because helpless people obviously need the assistance of an agent the most, most jurisdictions now recognize a "durable" power of attorney (abbreviated "DPOA"). A DPOA is "durable" because it is in effect even when the "principal" is mentally incapacitated.
While a non-durable power of attorney merely authorizes the agent to act as long as there is no incapacity, a DPOA resolves this problem by allowing a trusted agent, or nominee, to act even if the principal lacks legal capacity -- or in other words when that person cannot legally make decisions on his or her own behalf due to mental disability.
In California, a DPOA must have specific words to be "durable." It must state, as provided in California Probate Code §4124, that: "This power of attorney shall become effective upon the incapacity of the principal", or words to that effect.
Some Benefits of a DPOA
A DPOA has specific benefits; in fact, I would go even further to state that nearly everyone with a formal estate plan should consider having one. Here are some of the benefits:
Of Course, Not All is Perfect...
While very useful, the DPOA is not perfect by any means. One major problem is the possibility of abuse.
While conservatorships are bulky legal proceedings, there is at least court supervision. The DPOA lacks supervision and abuses have occurred, all too often. While conservators must jump through many legal hoops, there is no active court supervision or "hoops" for an agent under a DPOA. For example, California requires that conservators provide a court approved accounting of their financial activities. It also requires that conservators be bonded. But without a specific court order there are no such requirements for a mere agent.
Court proceedings can be filed, but that is often impractical. While court proceedings can be instituted to compel (for instance) the agent to submit an accounting or to revoke the agent's authority, this is done all too infrequently. There is a big difference between a court supervised conservatorship, and filing a petition with the court.
In any event, who is going to file the petition with the court? Remember: The principal is mentally incapacitated! Comatose people generally can't file probate petitions to compel their agents to account!
Sure, there are risks, and they can be addressed somewhat (but not completely) through a well-drafted document and some common sense precautions. A DPOA may not be for everyone. However, everyone should at least consider a DPOA as an element of his or her estate plan. An effectively drafted DPOA can "round out" a comprehensive plan, and fill in the blanks not covered in trusts and wills.
Disclaimer: The information in this article is not legal advice, and the use of it does not create an attorney-client relationship. Any liability that might arise from your use or reliance on this article or any links from this article is expressly disclaimed. This article is not to be acted upon as if it were legal advice, and is subject to change without notice, or may include obsolete or dated information, or information not relevant to your jurisdiction. If you require legal services, you should consult with an attorney.