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POWERS OF ATTORNEY: The Good, the Bad and the Ugly (Part I)

Most of the readers of this article are familiar with the general concept of a Power of Attorney. When properly executed, a Power of Attorney vests a person (designated as an "Attorney-In-Fact") with various powers. Powers of Attorney come in all forms, shapes and sizes. By way of example, one can create a Power of Attorney for limited and very specific purposes such as, for example, signing documents to close an escrow. Similarly, Powers of Attorney can be extremely broad, allowing the Attorney-In-Fact to do everything from signing Tax Returns to controlling bank accounts. These are called "Limited" or "Special" Powers of Attorney.

The advantages of a Power of Attorney are, to have a person available to perform acts for you when you are either unavailable to perform them or, perhaps as a result of injury or illness, unable to do so. By way of example, if you are out of the country when a particular act needs to be performed, it is not uncommon to grant a person a limited or special Power of Attorney to perform a particular act that may be time sensitive.

On the other hand, for a person who has been involved in a catastrophic accident or has suffered a debilitating illness or loss and who cannot handle their own affairs, at least for a limited period of time, and if a Power of Attorney has been duly prepared, this would allow the Attorney-in-Fact to take over the incapacitated person's finances and make sure all their bills are paid and their financial affairs properly managed. Such a document is called a "General Durable Power of Attorney."

There is also a Power of Attorney for Health Care (that in California is called an Advance Health Care Directive) which empowers someone to make difficult medical and end-of-life decisions for someone else. These are entirely different documents and should not be confused with General and Special Durable Powers of Attorney, which deal only with financial issues, as opposed to healthcare issues.

Powers of Attorney when properly utilized can be very beneficial. For example, if a proper Power of Attorney is in place, a formal, time-consuming and expensive legal proceeding to obtain a Conservatorship over the Person and/or Estate can usually be avoided. However, Powers of Attorney can also be abused. Imagine empowering someone to handle all of your bank accounts or your life savings in other assets. Is that person trustworthy? Will they take advantage of the situation? Obviously, this is a lot of responsibility for a person to have at their disposal.

General and Special Durable Powers of Attorney should only be granted for very specific purposes and to very responsible persons. Even family members can take advantage of the situation. In a follow-up article to this I will discuss other aspects of this uniquely beneficial, yet troublesome concept.