Most of my clients assume that their Last Will & Testament is the singlemost important document in their estate planning folder. But I would argue that a Durable Power of Attorney (DPOA) is the one estate planning document that you simply cannot do without. It is a relatively short and straighforward document (although a good estate planning attorney will make sure that their clients' DPOA's are "custom-designed" and not just use the same form for all clients), but the potential impact on future events can be downright enormous.
First, a DPOA is a document that is valid only while you are alive. Once you pass away, or if a conservator is appointed for you for some reason, then the document becomes null and void and your Last Will & Testament becomes relevant. The DPOA indicates that someone has authority to manage your affairs for you in the event that you become incapacitated, or if you are still competent but it would be more convenient for your agent to manage things for you. The document usually has a laundry list of matters that your agent can handle, such as managing bank accounts, investments, real estate, insurance, taxes, litigation, etc. Essentially, your agent can do anything that you can do unless you specifically limit the agent's powers.
So...why is this so important? Because if you do end up out-of-commission for some reason and you do not have a DPOA, then you and your family will most likely end up in your local Probate Court in the middle of a "conservatorship" matter. The Judge will appoint someone to manage your affairs (usually with the same powers as an agent under a DPOA), but before that happens a doctor has to evaluate you and declare you incompetent, a hearing is held, and an attorney will be appointed by the Court to represent you. Then the conservator has to report to the Court on a regular basis. The Court will charge you a fee for holding the hearing and your Court-appointed attorney will charge you for his/her time. In short, it's a nice process to avoid if you can...and a DPOA can help you do that.
But beware! An agent under a DPOA has very broad, sweeping powers and there is usually no one to supervise what the agent is doing. An agent could, with relative ease, clean out your accounts and head for Mexico (why does the perpetrator always head for Mexico? Why not Canada?) and it could be quite a while before anyone notices. So if you do sign a DPOA, choose your agent carefully! If you can't think of anyone who you could trust implicitly, then don't sign one...you would be better off with a conservatorship where the Court can act as a referee. But my experience is that nearly all of my clients can think of at least one person who is 100% trustworthy, even if that person is not a family member.
Most homeowners have a toolbox. If you're someone who does little fix-it jobs on the weekend once in a while, then your toolbox probably has a small handful of simple tools. If you're like me and you own a 19th century federal colonial with an endless "to do" list, then your toolbox is going to be a little bigger and there is going to be a lot of complicated tools in it. In fact, you'll probably have more than one toolbox! Well...I tell each of my clients that they need to have an estate planning "toolbox". Depending on the size and complexity of a client's estate, some clients just need a few simple tools and others need bigger and more complicated tools. But the DPOA is like a hammer...it's one of those tools that just about every client needs to have in the toolbox.
