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Durable Power of Attorney - "Scope of the Agency"

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By: Ronald Hudkins

A durable power of attorney is given by a person to another person to act in their place given a specific set of circumstances or activating condition. If you must have a real-estate deal go through on time and you are concerned that you may not be in the area, you could give another person power to close the deal in your absence. The person who gets the power is called the agent, which is a term not unfamiliar to those who do business, and the person who gives it is called the principle. The problem is that in a normal principle/agent relationship, the agent’s power ends when the principle becomes incapacitated. This is because the principle is responsible for the agent’s actions and normally wants to reserve the right to stop the agent from doing outrageous things with their assets while they are unconscious.

However, the rise of medical technologies that can cause a person to be unconscious for extended periods of time have caused many principles to want to have agents who can act in their place while they are alive and unconscious. So, many states have created the durable power of attorney to overcome this problem. The agent’s power survives incapacity if it is “durable” and is terminated by recovery or death.

A durable power of attorney is created immediately or upon some event that causes it to become effective. Usually, the durable power of attorney becomes effective when the principle becomes incapacitated.

The power that exists in any principle/agent relationship is what is referred to in law as the “scope of the agency.” The scope of the agency defines what powers the agent has or, in other words, what decisions the principle is turning over to them. Can the agent sell the principle’s property (as in the first example), withdraw money from the principle’s accounts or pay the principle’s bills? Because many principle/agent relationships are revocable by the principle, sometimes banks will not loan money to the principle at the agent’s request, because they are worried that the principle will wake up and say that the power was never intended. So, if you want your agent to have a durable power of any kind, it is important to be specific about that power or what is again called the scope of the agency.

However, the more power the agent is given, the more like a trustee they seem to be. So there is a Goldie Locks problem of giving the durable power of agency enough express power to do what needs to be done, without giving them too much power of attorney. But, the primary reason for the creation of a durable power of attorney is to give the agent the power to make health care decisions. For many other kinds of decisions a trust is the better instrument, but again it is important to stress that you have options when you plan your estate.

Typically, the agent with the durable power of attorney is created to be able to be an advocate for the decisions that the principle has already made in the form of the advanced directive or the living will. It is vital that the person you choose to have your durable power of attorney must be someone who you feel will be able to honor your wishes about very serious matters of life and death. Moreover, it might be better to have several people who are able to do this because the hardship of following through on some of the more life and death aspects of a living will make it easier to have a group of people do it, because they will be able to give each other support.

About Ronald E. Hudkins;

Ronald Hudkins is a retired U.S. Army Military Police member that was assigned as a staff researcher. He has coordinated with military and criminal investigators, set on court marshals and worked closely with the Staff Judge Advocate Generals Office (JAG). He has a keen sense of legal matters - their interpretation, initiatives and guidelines. For imperative financial planning needs he suggests his book “Asset Protection and Estate Planning for All Ages.” Additionally, he offers a Free Newsletter and RSS Financial Newsfeed at his web site: http://www.AssetProtectNow.com

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