The most common method of managing property during incapacity is using the Power of Attorney. In a Power of Attorney you, “the principal,” name a chosen “Agent” to exercise legal authority on your behalf as if you were performing the task yourself. Powers of Attorney can be very broad, authorizing any act that you could have done yourself, or they can be very limited and authorize only certain acts.
Powers of Attorney terminate at the principal’s death and in most states also terminate if the principal becomes incapacitated. Consequently, a Power of Attorney can become useless when it is needed the most. For a Power of Attorney to continue to be effective in the event of incapacity, it must be a “Durable” Power of Attorney. A Durable Power of Attorney will permit your Agent to continue to make legal decisions for you and manage your affairs regardless of any subsequent illness, accident, or other disabling condition you suffer.
The granting of legal authority to an Agent under a Power of Attorney can avoid the necessity of a guardianship court proceeding in the event of incapacity. The avoidance of a court proceeding and the relatively low cost of having an attorney draft the Power of Attorney makes it a popular estate planning tool.
Although Powers of Attorney may be inexpensive to create, they tend to suffer a number of shortcomings. First, if you believe that an important element of estate planning is to maintain control of your property while you are alive, the traditional Power of Attorney may not be acceptable to you since most Powers of Attorney give the Agent immediate legal power to act on your behalf even though you neither presently need nor want any help. This shortcoming can be avoided by using a “Springing” Power of Attorney that becomes effective when you are certified as being incapacitated.
Secondly, many banks or other financial institutions are reluctant to accept general Powers of Attorney. Also, the mere passage of time from the date you sign your Power of Attorney may render your Power of Attorney “stale” with some financial institutions. Although Wisconsin has no statute that limits the length of time the Power of Attorney can be in effect, a financial institution may require a court to establish the validity of the Power of Attorney before it is honored.
Perhaps the greatest shortcoming of the Power of Attorney is that it seldom gives direction to your Agent as to how you wish your assets to be used or the legal decisions you wish to have be made on your behalf. Unfortunately, the legal treatises are full of instances where Agents use their power to wrongfully abscond with the principal’s property.
Powers of Attorney offer valuable estate planning opportunities, but they also embody several significant shortcomings. Consequently, it is critical that you choose the Agent for your Power of Attorney with the utmost caution and that you receive thorough counselling from your estate planning advisor before signing.
Wayne W. Wilson