Chapter 4 - Durable Power of Attorney for Finances
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The Durable Power of Attorney (DPOA) for Finances allows a trusted person to spend money on your behalf and manage your property. Like the Power of Attorney for Health Care, discussed in Chapter 2, it requires you to name another person to act as your proxy and make decisions for you: in this case about your money and property rather than about health care.
In signing a DPOA for Finances, you are called the Principal. The person to whom you give these powers is called an Agent or Attorney-In-Fact. (As is true of the Power of Attorney for Health Care, neither the Principal nor the Agent needs to be a lawyer in order to use this legal arrangement.)
In taking care of business under a DPOA for Finances, your Agent is supposed to do what is in your best interest and use your money and property only for your benefit. By giving someone a DPOA for Finances, you are giving that person some or all of the following powers:
- To spend your money, cash checks and withdraw money from your bank accounts.
- To sell your property, including real estate and personal property.
- To enter into contracts on your behalf.
One of the few powers not granted is the power to write your Last Will and Testament. Only you personally can write your own Will. The Agent is also not authorized to make gifts to himself or to others unless the DPOA for Finances explicitly authorizes such gifts.
Also,your Agent will not have any authority with respect to your property when you die. (At that point the “Personal Representative” or “Executor” named in your Will or appointed by the Court will take control of your assets and their distribution.)
An advantage of the DPOA for Finances is that in signing it you do not lose any of your power to make your own decisions as long as you remain competent. Rather, you are simply sharing your power over your finances with someone else.
Another advantage of using the DPOA for Finances is that you can change your mind. You are entitled to revoke the power you gave to your relative or friend at any time as long as you are still of sound mind.
You may not want to share all of your powers with your relative or friend. For example, you may want to give your Agent the power to pay your bills and sign checks but not the power to sell your house. The DPOA for Finances can be as broad or as restricted as you want it to be.
Ordinarily a DPOA for Finances takes effect as soon as you sign it. This means that your Agent has authority to write checks, pay bills, make withdrawals from your accounts and sign off (on your behalf) on the sale of real estate and other property. You will still have the authority to do these things as well. In signing the DPOA for Finances you make the decision to share power over your finances.
This may be exactly what you want if you expect to be temporarily incapacitated by surgery or medication or have a medical condition which causes you to be competent some of the time and incompetent at other times.
You can also choose to have the DPOA for Finances take effect only in the event you later become incapacitated. Some people choose to sign a Springing DPOA for Finances because they are not comfortable with the idea of someone else having the power to write checks on their accounts and spend their money while they are still in good health and capable of managing their own affairs. Under the terms of the Springing DPOA for Finances, the Agent’s powers “spring” into effect when a health professional (usually the person’s attending physician) certifies that the person who signed the form is now incapacitated. Until that happens, the Agent has no power to act.
The disadvantage in using a Springing DPOA for Finances is that there may be a delay in getting the doctor or health professional to certify incapacity. This can prevent the Agent from taking prompt action with respect to the incapacitated person’s affairs and finances. Most people choose the non-springing form of the DPOA for Finances for the sake of simplicity.
If you decide that you want to plan ahead using a DPOA for Finances, you must first consider who is the most suitable person to act as your Agent. In choosing an Agent, you should look for the following:
- Someone you trust with your money.
- Someone willing to spend the time to pay your bills, do your banking, take care of your property, maintain insurance, pay taxes and deal with investments if you have them. This can involve many hours of paperwork every month.
- Someone who is knowledgeable about finances or who knows when to seek the help of experts.
It is also important that you talk to the person you have in mind before actually naming them as your Agent to be sure that the person understands your wishes and expectations and is willing and able to act as your Agent under the
You may choose one person to make both financial and health care decisions or you can separate these functions. You should also choose a Successor Agent to act as a replacement in case the first person you chose is unable to fulfill the duties under the DPOA for Finances because of illness, death, relocation or other reason.
The disadvantage of using a DPOA for Finances is that there is ordinarily no formal supervision of the person acting as your Agent. Since no court is involved in the signing of a DPOA for Finances, no court or agency will be watching to see that the job is done right. Although your Agent is supposed to make decisions in your best interest and use your money and property only for your benefit, the fact is that this person may have great freedom to do as he or she pleases. Therefore it is important that you choose someone you trust when you sign a DPOA for Finances.
The word “Durable” in Durable Power of Attorney means that your Agent can continue to make decisions for you even after you become incapacitated. If it is not durable, the power of attorney will be valid only for a limited period of time and will be useless once you become incapacitated. In order to be durable, the form must contain language similar to the following:
- “This Power of Attorney shall not be affected by subsequent disability or incapacity of the principal.” or, for a Springing DPOA for Finances,
- “This Power of Attorney shall become effective upon the disability of the principal.”
Under Maine law, any DPOA for Finances must also contain specific statutory language clearly explaining the rights and responsibilities of both the Principal and Agent. If you are the Principal, this language reminds you that you are giving your Agent broad powers over your finances, including the power to sell property and spend your money without your prior consent or approval. If you are an Agent, it warns you that you are under a legal duty to use the Principal’s money and property only on the Principal’s behalf and that you may be liable for damages or subject to criminal liability if you fail to do so.
You should also know that your Agent is not authorized to make gifts to anyone, including to the Agent himself, unless the DPOA for Finances explicitly authorizes such gifts. If you want your Agent to have this power, then you should include specific language in your DPOA for Finances.
When you sign a DPOA for Finances, you must have your signature notarized by a notary public or an attorney at law.
After filling out and signing the DPOA for Finances, you should give a copy to the person or persons named in the document. If your relative or friend is going to start making transactions for you immediately, you should give copies of the document to any person, business or organization with whom your Agent will be dealing, especially your banks. A telephone call or a visit to these places will help your bank, your insurance agent and others know that this arrangement is what you want and that they can transact business with your Agent on your behalf.
If the DPOA for Finances deals with the power to sell, lease or otherwise dispose of your real estate, you should have the Power of Attorney recorded in the Registry of Deeds , located in the county courthouse for the county in which the land is located. There is a small filing fee charged for that service.
The DPOA for Finances may involve complex financial and legal issues. Even if your estate is small, there may be issues concerning MaineCare eligibility and taxes. For larger estates the issues are even more complex. Although it may be possible to obtain ready-made forms, it is advisable to seek the help of a lawyer in executing the form to be sure that the document fits your needs and that it meets the requirements of Maine law.
There are places in Maine where you can go to get free and low-cost legal help with the preparation of a DPOA for Finances. (See Chapter 8, “Resources.”)
Whatever the reason: If you no longer want your relative or friend to handle your affairs, you have the right to revoke (take back) the DPOA for Finances at any time as long as you are still of sound mind.
In order to revoke a DPOA for Finances, you should write or type a statement which includes the following:
- Your name and the date.
- That you are of sound mind.
- That you wish to revoke the DPOA for Finances.
- Specify the date of the original DPOA for Finances.
- Specify the person or persons named as your Agents.
- Your signature, which should be notarized by a notary public or an attorney at law.
If the DPOA for Finances deals with real estate and was recorded in the Registry of Deeds, you should have the new form revoking the DPOA for Finances recorded in the Registry as well.
You should then distribute copies of this “revoking” form to your Agent(s) and to banks and all others who received a copy of the original DPOA for Finances. Again, a call or visit to each of these people and places will help to explain the situation and to show them that you are of sound mind.
If you are in good health, then you are not likely to encounter any trouble in revoking the DPOA for Finances. It will be obvious to everyone you deal with that you are competent to revoke the DPOA for Finances and to manage your own affairs.
However, if for some reason there is doubt about whether you are competent, people who have relied on the DPOA for Finances may be uncertain as to what to do. They may or may not follow your directions in revoking the DPOA for Finances.
If this is the situation, you should get a lawyer to help you to protect your rights. Legal Services for the Elderly, located in several offices throughout the State, provides lawyers who are experts in this area of law. Their services are available free of charge or at low cost to people 60 years of age or older. (See Chapter 8, “Resources.”)
After you revoke the DPOA for Finances, you may either:
- Execute a new DPOA for Finances naming someone else as your Agent to handle your affairs, or
- Handle your affairs on your own.
It is not appropriate to pressure a friend or relative into signing a DPOA for Finances. In order to ensure that your friend or relative is acting voluntarily, you should encourage him or her to consult a lawyer in private about the advantages and disadvantages of signing a DPOA for Finances.
Remember: The DPOA for Finances will not be effective unless the person is still competent when he or she signs it. If your older relative or friend is uncertain or unwilling to sign a DPOA for Finances, you should not try to talk him or her into doing so. Moreover, legal problems may arise later if it appears that you put pressure on the other person to sign the document.
In handling money and property as an Agent under the DPOA for Finances, you are acting as a fiduciary. This means that you are required to use money or property only for that person’s benefit in a way that he or she would want it used. You are not supposed to use it for your own benefit. If you do, you could be sued or prosecuted criminally. In addition:
- You may not “commingle” the person’s funds with your own funds but must keep those funds in a separate account.
- You may not make gifts of the person’s money to yourself or others unless the DPOA for Finances explicitly says that you may.
- You are supposed to save or invest money left over after the older person’s needs are taken care of. You must keep it secure in a place where it will earn interest or yield a return of some kind.
- You must take good care of real estate and personal property although you are not required to use any of your own money in doing so.
When your friend or relative dies, your authority as Agent under the DPOA for Finances will end. You will not have authority with respect to the money and property the person leaves behind unless you are also named as Personal Representative in that person’s Will or appointed by the court.
A Personal Representative (also called an “Executor” or “Administrator”) is a person, usually a relative of the deceased, who handles the administration of the Will and the distribution of money and property. For more information on the responsibilities of the Personal Representative, consult an attorney or the Register of Probate.