by Bruce L. Dorner
There’s a cute cartoon of three young boys in homemade costumes of their super heros. Two of the boys are wearing capes, masks and similar super hero garb. The third is dressed in his Sunday suit and tie with a large briefcase dangling from his arm. One child is explaining the trio to his mother. The caption reads something like, “I’m Superman. With the power of my cape, I can fly. Billy is Spiderman and can make a web and climb up walls, while Jimmy, in his suit, is the most powerful. He has the power of attorney!” It’s hard to do justice to the cartoon without the picture.
So, what’s a “power of attorney,” and why is it so important? In simple terms, a power of attorney is a written authorization for someone else to sign your name. Most of them flow between spouses or between children and their elderly parents. Powers of attorney come in many flavors and may be limited in scope by either subject matter or by date of expiration. For example, if you were planning on selling your house but knew you would be away on a business trip, you might give your spouse a power of attorney to sign all of the documents at the closing. In most cases we would use a limited power of attorney which would state that it is limited only to the transfer to the buyer named in the purchase agreement and that it expires on the date you return from your trip.
We regularly recommend a durable power of attorney as part of a basic estate plan. (Remember my article a few months ago about the importance of having a will?) This durable power of attorney is, in my opinion, often more valuable than a will. You only use a will once — at death. A power of attorney may be used on many occasions. Normally, a power of attorney related to estate planning provides for someone else to sign your name. It is truly a magnificent tool. Let me provide an example from a case I handled.
Mom and Dad came to my office for a “simple will.” After discussion we determined that a “simple will” just wouldn’t fit their needs and that supporting materials were clearly necessary. One of the key documents was a durable power of attorney. Each signed a power of attorney. Dad gave authority to Mom to sign his name and Mom gave similar authority to Dad. Six months later Mom was diagnosed with a terminal illness and was unable to manage business affairs. She had been handling the sale of some family real estate. Dad called in a panic and told me that a closing was to be held in three days. If the deal did not conclude, they would face a $50,000.00 tax burden. I told him not to worry. I explained that we could use the power of attorney. He would go to the closing and sign Mom’s name. I contacted the attorney representing the buyer. I outlined the problem, and we coordinated the transfer without placing any stress on Mom. Dad had forgotten why we prepared the power of attorney as part of the estate planning package. But, I assure you, he was very happy with the ease of solving his problem.
With current medical treatment advances, it is far more likely that you will be disabled or endure a long-term illness than you will die quickly. Think of the difficulty your family would have if you were in an accident and suffered a brain injury. You were the one who signed all the checks. You never thought your spouse would care. Now, your spouse doesn’t have authority to sign checks. Even worse, your pay is automatically deposited to that same checking account. Here we go again! Power of attorney to the rescue!
Now, with all the positive aspects of a power of attorney, let’s also consider the risk factors. The example is a little far fetched, but not impossible. You go away on a three-week business trip. You return home from the airport late at night and put the key in the door. The key doesn’t fit. Something’s very wrong. A nice young lady comes to the door. You’ve never seen her before. Words are exchanged and the upshot of the discussion is that she just bought your house from your spouse and took title based upon your spouse’s use of the power of attorney. Well, you’ve got a great claim against your spouse, but you probably have no claim against the new home owner.
So, how do you avoid the worry of a marriage gone bad? Easy! We draft a letter of instruction. For most families the letter is from them to me, as their attorney. In short, it states that I am to keep the original power of attorney and release to the other spouse if I believe the intended use is valid. If I don’t agree with the reason, the letter instructs me to deliver the original power of attorney to the court and seek guidance from the judge. In reality, the letter of instruction is a safety valve that is rarely used, but when needed, can save a family from bad judgment. Now, if you really want a variation on the power of attorney theme, we can talk about springing durable powers of attorney, but, to turn a phrase, “spring” is a few months away!
This article provides general information only. You should consult with your own attorney before making and legal decision.