Durable Powers of
Attorney: Value Added
Cheryl Chapman Henderson
The most valuable and
cost-effective estate planning tool that you prepare for your client is the
durable power of attorney (DPOA). By DPOA, your client can choose in advance
who will think, speak, act and govern his or her affairs when (s)he is no
longer able to do so. A well-prepared and managed DPOA can singularly affect
and shape your client’s well-being and quality of life when (s)he is
most vulnerable and least able to make his or her own life choices.
The DPOA can be comprehensive
in scope and can affect all phases of your client’s financial, business
and transactional affairs. Yet despite its critical value, too often it’s
become the stepchild of the estate-planning arsenal. We as practitioners
may prepare them generically with little forethought or design. Our clients
may regard them as necessary “paper” which could conceivably
be purchased from the office-supply store or downloaded from a do-it-yourself
The only formal requirement
of Maryland’s DPOA statute is that the DPOA be in writing. MD Real
Prop. Code Annotated §4-107 requires that the DPOA be executed with
the formalities of a deed where used to convey interests in real estate.
There are few Maryland cases construing DPOAs.
Here are some practical
suggestions for making sure that your client’s DPOA works when it is
most needed – when your client is incapable of making life-affirming
- Choice of agent makes
or breaks the most carefully-tailored DPOA. The most important qualities
to look for when selecting an agent are integrity, humility, strength of
will and devotion to the interests of the principal. With those qualities,
any shortcoming in financial ability and business acumen is easily overcome.
Without those qualities, even a financial genius can spell disaster.
- Assess how the DPOA
is likely to be used. Examine the client’s assets. Do they include
stock portfolios? Pension funds? Are businesses involved? Also, examine
the functions that the agent is likely to carry out, such as to transfer
assets, settle tax disputes, engage in litigation, borrow funds or make
gifts. This analysis determines what steps need to be taken after the DPOA
- Clearly advise your
client on the importance as well as the realities of the DPOA. On one hand,
without a DPOA or an improperly prepared one the client may be forced into
the expense, humiliation and intrusion of guardianship proceedings. On
the other hand, an unscrupulous agent can leave the client exposed to vulture-like
exploitation. In between, there are third parties who refuse to acknowledge
the agent’s authority. Encourage the client to take ownership of
the DPOA so that (s)he can be on guard for potential problems.
- Prearrange the relationship
between third parties and the named agent. Don’t wait until your
client’s incapacity to test the DPOA’s acceptability with third
parties. Banks are notorious for not recognizing the DPOA. The federal
government prefers to recognize representative payees over agents in the
paying out of benefits. An effective way of prearranging the relationship
is through a letter instructing the third party to recognize the agent’s
authority and requesting if it doesn’t to advise what steps are required.
- Anticipate other jurisdictions
where the DPOA may be used and make sure yours complies with their requirements.
For example, anyone with a client who owns real estate in the District
of Columbia must be aware of D.C. Code Section 45-601 which requires that
the DPOA contain specific language in a specified location and format.
Without satisfying those requirements, your client’s agent cannot
transfer a recordable interest in D.C. real estate.
- In case of a client
that does not want to give the agent unbridled authority, consider the
limited DPOA and discuss its usefulness. Also, a general DPOA can be lengthy.
A limited DPOA may be a page or two. The costs of recording real estate,
for example, can be reduced considerably with a limited DPOA. Consider
using both a general and limited DPOA where appropriate.
- The gifting of assets
can be a useful tool in estate planning. Yet there is no implied authority
for an agent to make gifts. If gifting is what the agent may be doing,
make sure that power is expressly spelled out in the DPOA.
- The practitioner’s
goal is to craft a DPOA for the client that is effective and accepted when
and where needed. Not to be overlooked is the importance of presentation. The
well-prepared DPOA should be
“user-friendly” for not only the client but also for the agent
and the third party relying on it. It should look good, as if it were tailor-made
for the client. Finally, it should bear all of the solemnity that is associated
with important legal documents: be witnessed and notarized.
A more hands-on approach
to designing and preparing the DPOA can enhance both its value to the client
as well as its value to the service the practitioner provides.
Cheryl Chapman Henderson
is the founding member of the law firm of Cheryl Chapman and Associates,
LLC, where she concentrates her practice in the areas of estate planning,
elder law, probate and real estate.