Most people are aware of the fact that they should have a will and an estate plan so that upon death their estates can be administered and distributed to their beneficiaries promptly and efficiently. However, many people fail to plan adequately for lifetime disability. You should be concerned about the possibility of your disability, that is, your inability to legally handle your affairs (business, financial, and personal). Disability can arise from a number of different causes, for example, illness (such as stroke), injury, accident, or old age. If you are unable handle your affairs, who can and will do this for you?

In such cases, Nevada law provides for a probate court proceeding to have an individual or bank appointed to act for you. Guardianship and conservatorship proceedings involve time, expense and perhaps even the embarrassment of trying to prove that you are mentally incompetent. Furthermore, you have no assurance as to whom the court will appoint.

However, a Durable Power of Attorney can save you and your family the time, expense, and inconvenience of a probate court proceeding as well as giving you the power to choose the person who will handle your affairs.

WHAT IS THE POWER OF ATTORNEY?

A power of attorney is a document by which you appoint a person to act as your agent. An agent is one who has authorization to act for another person. The person who appoints the agent is the principal; the agent is also called the attorney-in-fact. If you have appointed an agent by a power of attorney, acts of the agent within the authority spelled out in the power of attorney are legally binding on you, just as though you performed the acts yourself. The power of attorney can authorize the attorney-in-fact to perform a single act or a multitude of acts repeatedly.

WHAT IS THE DURABLE POWER OF ATTORNEY?

Many people are unaware that an ordinary power of attorney is revoked, and the agent’s power to act for the principal automatically stops, if the principal becomes incapacitated. A durable power of attorney is not affected if the principal becomes disabled or incapacitated.

DO I NEED A POWER OF ATTORNEY IF ALL MY PROPERTY IS OWNED JOINTLY WITH MY SPOUSE?

Yes. If you are disabled, your spouse can still sign checks and make withdrawals on joint bank accounts, but your spouse cannot sell jointly owned stocks or your jointly owned home without your signature. Your spouse cannot name or change a beneficiary on your life insurance or your retirement benefits. Even if you own everything jointly, you both should consider having Durable Powers of Attorney.

CAN A DURABLE POWER OF ATTORNEY BE REVOKED?

As long as you are competent you can revoke your Durable Power of Attorney. The revocation should be in writing, and it should be delivered to the agent and to third parties with whom the agent is dealing. A conservator appointed by the probate court can revoke the Durable Power of Attorney. Finally, the Durable Power of Attorney terminates at the time of your death, except for making funeral arrangements. However, a third party is entitled to rely on a power of attorney which has been terminated or revoked until the third party has actual notice of the termination.

WHOM SHOULD I NAME AS MY AGENT?

You may name any adult. But, you should select an agent who is willing to act and in whom you have confidence and trust. Remember, your agent may be making important financial and personal decisions for you. Some of the criteria you should consider include the following:

1. Who cares about you?
2. Is the person too young or too old?
3. Does the person live close to you?
4. Is the person organized and know when to ask for professional help?

WHAT ARE THE AGENTS OBLIGATIONS TO ME?

You can revoke the Durable Power of Attorney or, if because of your disability you are unable to revoke it, anyone interested in your welfare can ask the probate court to intervene and appoint a conservator to handle your affairs. The conservator can require the agent to account and report, and can even suspend or revoke the Durable Power of Attorney. In addition, you (or your conservator) can sue your agent for damages caused by the agent’s abuse of authority.

PROBLEMS WITH A DURABLE POWER OF ATTORNEY

The biggest problem with any power of attorney is that there is no guarantee that it will be accepted or recognized by third parties. For example, if the purpose of the Durable Power of Attorney is to deal with governmental agencies, such as the Social Security Administration, the Veterans Administration, or the Internal Revenue Service, one must either use the agency’s special Power of Attorney form, or make sure that the Durable Power of Attorney presented to the agency contains the special wording required by each agency’s particular form. Many powers of attorneys do not contain this language.

Another problem occurs if your agent quits, dies, or becomes disabled, in such an event, if you haven’t named an alternate agent, there will be no one to act on your behalf.

DANGERS IF POORELY DRAFTED

The first danger is that one cannot make gifts using a Power of Attorney, unless the Power of Attorney specifically allows for gifting. This is a major concern for those on Medicaid. Many drafters of power of attorneys are unaware of this. This is very important for the middle class, as this gifting language is necessary to do proper public benefits planning.

Furthermore, unless a Power of Attorney includes this explicit gifting language, death bed gifts of the annual exclusion amount cannot be made.

Second, a trust cannot be amended or revoked using a Power of Attorney, unless the Power of Attorney specifically allows this. Many drafters are unaware of this as well

Third, inherited property cannot be disclaimed unless the Power of Attorney specifically allows disclaimers.

Fourth, legal descriptions of property you own should be attached to the Power of Attorney to allow your agent to buy, sell, or refinance the property. If this is not attached to the Power of Attorney, most title companies will not issue title insurance as the Power of Attorney will not properly be on the chain of title without the attached legal description.

ADVANTAGES OF A DURABLE POWER OF ATTORNEY

1. You (not a court) select your agent.
2. It can give you and your family some peace of mind knowing that you have named someone to handle your affairs.
3. It can save time and the expense of a court proceeding.