By: Erika McNamara, Sierra Willnus, and Charlotte Doran
A Durable Power of Attorney document (DPA) allows someone to manage the finances, property, vehicles, and other assets owned by another person. This person is called an Agent. Before someone is unable or unwilling to manage her own assets, it is necessary for a DPA to be established. Although DPAs are often made for elderly people to help them as they age, the need for this document isn’t only for the older demographic. A DPA is a sort of “safety net” in the event of an individual suddenly becoming incapacitated or unable to take care of his or her assets, which can happen at any age. For example, if a person gets into an accident and goes into a coma, he or she may need someone else to take care of his or her bills and other responsibilities. For this reason, adults of every age should have a DPA.
Under the Durable Power of Attorney document, the Agent has full legal capacity to manage the assets of whoever appointed the individual as his or her Agent. However, he or she must manage his or her money, property, and other assets as the person who appointed the Agent would. For example, if a person regularly pays an electricity bill, the Agent would regularly pay that bill in place of the person who elected them. Another example of this is gift giving. For instance, if someone regularly gifts his or her grandchildren fifty dollars for their birthdays, the Agent would give the grandchildren fifty dollars in place of the person who elected them. The Agent cannot act outside of the normal spending or gift giving of the person the Agent is acting in place for. So, for example, an Agent cannot write a check to himself or herself for a thousand dollars from the person the Agent is acting for. However, if that person regularly gifts the Agent a thousand dollars, for a holiday or otherwise, the Agent is allowed to write that check. The Agent also may donate to charities on behalf of the person who elected them (i.e. monthly or annual donation). Sometimes it is difficult or even impossible to know the regular payments a person makes. For example, the Agent may not know that the person the Agent is caring for gives fifty dollars to their grandchildren every year for their birthdays. However, the point of a DPA is to assure that the Agent is acting in the best interest of the person whose assets the Agent is managing. The Agent can also ask family members or friends for assistance if he or she needs it, and those family members and friends can check in on the Agent and make sure the Agent is acting in the best interest of their loved one.
Along with paying bills and gift-giving, the Agent also has the responsibility to file tax returns for the person the Agent is caring for. The Agent also may apply for government benefits on behalf of the person who elected them, as well as request medical records. If a person has a business, his or her Agent can fire or hire employees at any time. The Agent does not necessarily need to take over the business, but the Agent has the power to terminate or hire employees at any time.
Usually, a person nominates a succession of three people to become his or her Agent. If the first person nominated is unwilling or unable to serve as the Agent, then the Successor Agent would become the Agent. And if that person was unwilling or unable to be the Agent, then the Alternate Successor Agent would become the Agent. It is smart to choose more than one person to become an Agent just in case the initial Agent passes away before the Durable Power of Attorney can be enacted, or the initial Agent is too busy to handle someone else’s assets. It is possible to have Co-Agents, or more than one Agent working together to handle a person’s assets. However, having Co-Agents can lead to disagreements in how the assets should be managed, and can create a lot of problems in bills not being paid, etc. because of a lack of communication.
As the grantor of the responsibilities under the DPA, a person may change his or her Agent at any time, or revoke her Durable Power of Attorney document by making a new one. It is important to have a Durable Power of Attorney document on file at the bank no matter how old you are. Please contact McNamara Law for more resources and information about how to create a Durable Power of Attorney document.
Created by McNamara Law. 517-552-4092. www.gentrynalley.com