The Durable Power of Attorney Applications and Limitations

• Author: by Major Michael H Schmat' and Captain Steven A. Hatfieid
• Pages: 09

1. INTRODUCTION

   Durable powers of attorney have been receiving increased attention as the American public becomes more concerned with quality of life issues. These instruments are nothing more than variants of basic powers of attorney, with which most legal amstance officers are familiar. As with ail powers of attorney, they serve to create an agency reiatmnshipl between the grantor of the power-the principal --and the grantee-his or her agent.# The power that is created is

   of Mlllt~n Appeals

   >3 Am Jur 2d Agency 5 23 (1862). lo Smith v Luted State% 113 F Supp 702 (DHau 19631, the eaurt noted. ' A power af attorney creates an agenw relatianlip, wlth the glrer of the power remaining the legal owner of my pmpeny rnvolved ' Id at 707

   'Though agenw relafronrhips may be created orally most states require a power

   of afrorney 10 be er7deneed b) B wnflen inifrumem When no such statutory require-ment eXl~r8,horever moral pone? of attorney may be created. See Bmwn v Pouloa 411 X E Zd 712 (Ind Ct AID 18801 (oml m~erof attomes recodzed1 lieveertheleis d l poxen of attorney should be in antinB to ensure accepta&e by thid panlea

   the right of the agent to "step into the pnncipal's shoes" and act on the pr~nc~pal'sbehalf

   At common law. any agency relationship automatically was terminated by the death or mcapaclt) of the principal This rule was based on the premise that because the principal was no longer able to oversee the actions of his agent. a continued agency relatmnship was imprudent Unfortunately. the terminatmn of the reiatmnshlp upon the incapacity of the principal had the effect of deprning the principal of his agent at the very time he was needed most-when the principal was no longer able to

   The durable power of attorney IS designed to surwve the mcapaclty of the principal. By its terms, It continues the agency relationship when. at common law, that relationship would be extinguished. This article will examine the durable poxer of attorney, concentrating onthe uses to rvhich it might be put by military members

   11. ORIGIN OF THE DURABLE POWER OF ATTORNEY

   Traditionally. rhe only person who could act on behalf of an incapacitated individual was a conservator or guardian designated by COURorder.6 Unfortunately. appointment involved cumbersome and expensne legal proceedmgs.7 The drafters of the Uniform Probate Code (TPC) recognized the desirability of creating a functional and expedient alternative to this process To that end, the) suggested a statutorr modificanan of the common law of agency, as Lt applled

   1991j DURABLE POWERS OF All'ORXEY

   to powers of attorney, that would recognize the intent of the principal that the agency relationship survive incapacity or disabilityB

   With the promulgation of the Uniform Probate Code in 1969, the National Conference of Commissioners on Uniform State Laws introduced the concept of the durable power of attorneyB Dn years later, the provisions of the UPC dealing nith the durable power of attorney were extracted verbatim from the UPC,modified, and published as the Uniform Durable Power of Attorney Act (UDPA)!O Currently, all fflty states recognize some vemon of the durable power of attorney, havmg adopted either the UDPA, the UPC, or same "aria-tion of them. These " V ~ T S ~ O ~ S " of the durable power of attorney vary widely from state to state. This article will note some of the more significant differences, however, no attempt wii be made to catalogue all variations.

   As noted, the essence of the durable power of attorney is a modification of the common-law rule of revocation by operation of law upon incapacity of the principal?' Two basic means are available to accomplish this purpose, both illustrated in the UPC's definition of a durable power of attorney

   A durable power of attorney is a power of attorney by which a principal designates another his attorney-in-fact ~n writing and the writing contains the words "This power of attorney shall not be affected by subsequent disability or incapacity of

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   the principal," or "This power of attorney shall become effec-tive upon the disahihty or incapacity of the pnncipal " or similar words showing the intent of the pnnapal that the authority conferred shall be exercisable notwithstanding the principal's subsequent disability or incapacity

   The phmse "shall not he affected" is used when the principal wishes to create an agency relationship that 1s effective immediate-iy and will continue m effect throughout any subsequent disabiht) On the other hand the principal may want to create a "springing' durable power of attorney by including the phrase "shall become ef-fective upon" m the document. Springing powers of attome) only become effectme--or "spnng" into effect-upon the disability of the principa113 Although the statutory language 1s preferable, using "s~milar words showing the intent of the principal" to create the durable power of attorney will suffm." Legal asstance attorneys should be aware that a few states. such as Texas and South Carolina, do not

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   statutorilyrecognize the "sprindng" power of attorney?bThus, even before considering which type is most appropriate for the client, attorneys should determine whether the law in their jurisdiction allows both types of powen.

   Because the durable power of attorney S U ~ V I V ~ S

   incapacity, the issue of revocation 1s raised. The common-law rule of agency-thata principal may revoke the authority of the agent at will-also applies to the durable power of attorney. Therefore, one who executes a durable power of attorney, whether immediate or "sprinsng," re. tains the power to revoke it. Once the principal becomes incapacitated, however, revocation no longer is possible The %me incapacity that prevents the principal from acting on his own behalf will prevent him from reuokmg a prevmusly executed durable power of attorney9 Clients should be cautioned about this limitation.

   The durable power of attorney also modifies the common-law rule concerning termination upon the death of the principal. At common law, the death of the principal revoked the power of attorney, regardless of whether the attorney-in-fact or tlurd parties had notice of the death" This is not the case under section 5-604 of the UPC:

   The death of a principal who has executed a written power of attorney, durable or otherwise, does not revoke or terminate the agency as to the attorney-m-fact or other person, who, wnhout actual knowledge of the death of the principal, acts in good faith under the power. Any action so taken, unless otherwise invalid or unenforceable. binds successors in interest of the principalln

   The UPC also provides that an affidavit of the attorney-in-fact stating that he did not have knowledge of the death of the principal

   lEln

   States where the durable power of alf~rney stature does not aufhonie kf to become effecflve upon the diiabrlity or incapacity of the prmclpal, it should 001 be pmwmedfhata 'sprmsng' durablepowerofatfaroey w~llbe recognved SC CodeA m 5 62-6-5Ol(al (Law Co-op 1987), 'Ex Rob Code A m g 36A (Vernon Supp 1990)

   "More3 & Pope, Estab Plonntng, Dzsabzlzty. and Iha Ihlrobli mum 01

   Attorney.

   30 S C.L. Rev 511 (IBiB) kloses and Pope note that at the onset of incompetency a pnncw's contractual dw.b#lltY would pmrent him from both entenng and ,aldlng contracts The) then cite South Carolina ~meistanding for the ~ropositionthat men-

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   at the tlme that he exercised the power of attorney IS concIus~vc proof

   of the nonrevocation or nonterrnination of the power" This change to the common law pro\ ides much-needed secunty to the agent nho LS relieved of haiing to check the principal's condition before taking any action In addition, it protects individuals with whom the agent 1s dealing by allowing them to place greater reliance on the agenc! relationship.

   A final note IS m order pnor to turning to specific functions of the durable paaer of attorney Although the creation of the durable power of attorney was meant as an alternative to the costly process of obtaining a court~appointed guardian. L! has not completel) sup-planted the role of the guardian. This IS evident ~n UPC section 5 503's handling of the relationship between a "durable" attorney^ in-fact and a caurt~appainted fiduciar)

   If. following execution of a durable power of attorney. a court of the principal's domicile appoints a conserrator guardian of the estate. or otheriiduciary charged with the management of all of the principals property or all of his property except specified exclus~oni.the attorneg In-fact IS accountable to the fiduciary as well as to the princ~pal The fiduciary has the samr power to revoke or amend the power of attorney that the principal would have had if he were not disabled or incapacitated j''

   Realizing that a court appointed fiduciary can revoke the power of attorney the principal may wish to include a clause in which h? nominateb an Individual-presumably the attorne)-in-facl-to serve as his guardian in case one IS appointed According TO thr CDP.4. the intent oi the principal in such a situation ~ 1 1 1 be respected

   A principal ma! nominate b) a durable power of artorney. the conservator guardian of his estate 01 guardian of his person for conaideratian by The Court If protective proceedings far the principal's person or estate are thereafter commenced The court shall make its appointment in accordance with the principal's most recent nomination in a durable power of attorney except for good cause or disqualificarion 21

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   One easily can imagine a situation m which ths aspect of a durable power of attorney could become important Conilicts of interest may arise between attorneys-in-fact and othen with an interest in the estate or well-bemg of the principal. The other individuals could defeat the intent of the principal to have his attorney-in-fact act on his behalf by instituting protective...