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August 11, 2004: Durable Powers of Attorney Revisited

Q. Although I have previously written about Durable Powers of Attorney, I have recently received so many questions about them, I decided to again revisit the subject.

A. Except for making medical decisions, no one, including a spouse, can make decisions or do legal acts for another without some type of legal authorization, such as through a Durable Power of Attorney, a court appointed conservatorship/guardianship, etc. In fact, with the recently enacted privacy laws, difficulty has been encountered in even having access to medical information.

Without a Durable Power of Attorney, it would be necessary to spend several thousand dollars going to court to set up a guardianship and then having a judge determine who would make decisions. It is very possible that a bank would be appointed, not the spouse. In addition, an inventory, annual reports, bonds, etc., all would be required, adding to the red tape and expense.

Durable Powers of Attorney would permit a person picked by the principal, not by the Court, to be empowered to act, thereby avoiding the initial and continuing court costs. Also the principal could revoke the authority, unlike the court proceedings where a judge would have to agree to end the guardianship.

I prefer to do an all encompassing Durable Power of Attorney without restrictions so the agent is not painted into a legal corner and usable to act at just the time when help is needed since one of the preconditions have not been met. Thus, it is dangerous to say, for example, that this document can only be used if I am "incapacitated."

I like to have clients sign four originals so that if after use the document is not returned to the agent by the person to whom it was presented because it is being kept as part of the permanent file, there are three left if the principal is not able to sign additional Durable Powers of Attorney.

A primary agent should be designated with at least one backup so if one agent is not available, a backup could still use the document.

Be careful about the "five year" rule. In Colorado, a Durable Power of Attorney is good forever. In fact, documents I did way back in 1978 were just used. But in many states there is a five year cutoff terminating the legal authority. In other states after five years, the powers are "stale" (third parties do not have to honor them).

When dealing with people and companies in states with the five year rule, or because so many of our local banks have been taken over by out-of-state companies, agents have been frustrated when challenged by such people or companies because the Durable Powers of Attorney were too old. So to make things easier for agents or to be sure that agents can act, people in Colorado are often redoing their Durable Powers of Attorney every five years to update them.

Often people fear Durable Powers of Attorney but in Colorado no one can bind a principal unless an original document is possessed by an agent. So the easiest method to maintain control is to only let an agent have possession when something needs to be done. Thereafter the principal should get back the original Power after the particular task has been done.

Out of space but just a couple of comments. Having a trust or asset ownership such as joint tenancy is not a substitute for a Durable Power of Attorney. The Power is still needed in both cases. The two exceptions to the rule are to add a name to the signature card of a bank safe deposit box and to a checking account. Since a Durable Power of Attorney’s authority ends at death, checks can still be written and the box can be accessed.

In summary, if you have a Durable Power of Attorney, consider redoing the Power if it is older than five years, or if only one or two originals were signed, or only one agent can use it, or if it has restrictions. If you do not have a Power, get one.


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