Stephen Gizzi is a local attorney, President of the Solano County Bar Association and Judge pro tem with the Solano County Superior Court.
A properly written estate plan always includes a durable power of attorney document. This is a very simple, but extremely powerful legal document, whereby one person (the principal) authorizes another (the agent) to act on the principal’s behalf when he or she is unable or unwilling to do so. As you can imagine, the principal must choose the agent with great care due to the tremendous power, authority and control that is conveyed.
The power of attorney can be written so that it becomes effective immediately or, as is more often the case, upon the incapacity of the principal. It can be all-encompassing so that the agent acts on behalf of the principal in all financial and business affairs; or it may be limited to just particular functions such as banking, real estate or household matters. Once activated, it can be revoked if the principal’s capacity is restored or if the principal decides to rescind the authority for other reasons. When preparing the power of attorney document, “capacity” can be defined, or a formula for determining capacity can be established, in any manner acceptable to the principal.
Though the document is powerful, it’s also very important for all adults to have one in place. One never knows when a medical condition, accident or other circumstance will leave the individual temporarily or permanently unable to manage personal affairs. If such an unfortunate occurrence arises, and one does not have a power of attorney in place, the alternatives are extremely expensive and time-consuming.
Without a power of attorney, if an individual suddenly becomes incapacitated, a close relative or friend must petition the court for a “conservatorship” in order to gain similar powers. If one holds joint ownership of certain accounts with the incapacitated party, that person may be able to act as to those specific accounts without a conservatorship. However, the powers will be limited to those.
In order to obtain a conservatorship over a person, one must petition the probate court. The court must then verify the person’s mental capacity and appoint an attorney to represent the person who is allegedly incapacitated. Financial statements and accountings must be filed with the court both initially and on an ongoing basis. Several hearings are held in order to obtain a temporary, and later a permanent conservatorship.
We recently obtained a conservatorship on behalf of the spouse of a 57-year-old business owner who had a stroke and did not have a power of attorney. By the time the accountants were paid for preparing the necessary documents for the court and all attorney fees, the six-month process ran close to $8,000. The fees and months of angst all could have been avoided with approximately 1 ½ to 2 hours of attorney time devoted to the preparation of a power of attorney.
So…the moral of the story? No matter what your age, be thoughtful and judicious in choosing whom you would like to have “step into your shoes” if you are unable to act on your own behalf, and formalize that in a durable power of attorney. You will be doing yourself and your loved ones a big favor.