Durable Financial Power of Attorney: You've Got a Friend in Pennsylvania

Remember the slogan "You've Got a Friend in Pennsylvania"?  There are times in life when you need a friend here in Pennsylvania.  If you are temporarily out of town or on an extended trip, if you are laid up in the hospital (imagine surgery and recovery) and in the worse case, if you are physically or mentally incapacitated (such as advanced Alzheimer's), you may need someone to handle your financial affairs, either on a temporary or permanent basis, and for either a limited purpose or for general purposes. 

If you do not plan for the event, if the circumstances occur that leave you incapacitated, then your loved ones may go to court and ask the court to appoint a guardian to handle your affairs. The court may choose the same person that you would have chosen had you been able to make that decision; or it may choose someone else who you might not repose the same confidence in.

At that point, the decision is in the hands of a local judge who doesn't know anything about you other that the information that has been brought before him for decision by the people seeking the appointment and their lawyer. The process works, but it involves time, money, and the legal system, and you may or may not be in agreement with the final result.

The alternative: A durable financial power of attorney. In general a power of attorney is a written document in which you appoint one or more people to act on your behalf.  It is "durable" when the authority that you give in the document is intended to continue even if you become disabled.  Under common law, a court might not enforce the power if you became disabled.

The result seemed to defeat the whole purpose of giving a power of attorney, and so many states, including Pennsylvania, adopted laws that now give the benefit of doubt to these powers, and presume that they are meant to be "durable" (and continue in effect during disability) unless someone can prove otherwise.

You can appoint one person as your attorney in fact; you can appoint two or more; you can have a first choice, a second choice if the first one is unavailable; and a third choice, and on and on. 

You can make a limited appointment (e.g. to sign real estate closing documents when the spouse is out of town that day); or for a limited time period ("while I am vacationing in Tahiti during the month of December"); or a more general power to do "everything I could do if I were personally present." 

You can make the power effective immediately, and put it in a desk drawer until needed; you can make it effective upon the occurrence of a certain event ("in the event I am determined by my doctor to be incapable of managing my affairs"). If you are planning for the unknown event that might otherwise result in the appointment of a guardian, I generally recommend that you write this document as broadly as possible, and put your effort and thought into who it is that you will give this power to. 

You are going to appoint someone who you trust to have your interests in mind.  Your spouse is the logical first choice. A loving child or grandchild serves that same purpose. A willing friend can serve as well. They need to be relatively available, willing to serve, and have the ability and judgment to do a good job. 

Remember that you can appoint more than one person, who can act separately or jointly, so you can bring in the experience and judgment of someone who lives far away, with the availability of someone who lives closer to home and can run to the local bank if necessary. You want to consider authorizing reasonable compensation as well - perhaps not for the short term or limited power, but if you consider the role of a guardian, continuing possibly for many years, this is a task for which some compensation may be in order.

And a last consideration: Now imagine that person coming into your house to find your checkbook and financial records to figure out where to begin to exercise the power in good faith.  If you have gathered together your files and records, together with a note of explanation as to what you own and what you owe, and discussed this all with your designee in advance, then you will have planned for the event and facilitated it. 

If your records are in disarray and in boxes under your bed, or places known only to you, if your financial records are all organized nicely in Quicken on your computer, but password protected, then you have not completed the planning process.  So, decide what you need, decide who you would choose, talk to them, prepare the document, and then put the icing on the cake—get organized just in case. 

Perhaps when we do this, when we go through the process, we actually ward off the event by preparing for it!  

©2011  Douglas P. Humes

Doug Humes has been a practicing attorney in Pennsylvania since 1980.  He has experience in real estate, community, corporate and small business law, and estate planning.  In 2003, he opened his private general practice at the Millridge Manor House in Bryn Mawr, Pennsylvania.  Doug is also a Pennsylvania notary public and offers that service as an accommodation to clients and Millridge residents.  You can contact him at Suite 210,  Tel: 610-525-7150, or via email athumeslaw@verizon.net).