Incapacity Planning – Powers of Attorney

When people think about estate planning, they often think of “what happens to my assets when I die.”  But an important aspect of estate planning is preparing for the orderly management of your affairs if at some point in the future you no longer have the mental capacity to make decisions for yourself.  A Power of Attorney document is one alternative for addressing such concerns, which allows the maker (the “principal”) to appoint a trusted individual (the “attorney-in-fact”) to make decisions on behalf of the principal.

Such a powerful tool needs to be drafted carefully.  By default, a Power of Attorney is automatically revoked and of no effect if the principal later becomes incompetent.  However, a properly drafted “durable” Power of Attorney will remain effective even after the principal is rendered incompetent.  A person setting up a Power of Attorney has a lot to think about.  Who is most qualified to act as the attorney-in-fact?  Is that person willing to serve as the attorney-in-fact if called upon?  Should the powers granted to the attorney-in-fact be broad or narrowly tailored?  Should the attorney-in-fact have authority to act even while the Principal remains competent?  Or should the powers granted to the attorney-in-fact only “spring” into existence if the Principal is later proven to be incompetent?

Minnesota has a “short form” or “statutory” power of attorney form that is basically a fill-in-the-blank document, and the principal can select from a “checklist” of powers to be granted to the attorney-in-fact.  The “short form” power of attorney is useful if the attorney-in-fact is called upon to deal with third parties within Minnesota, but the extent to which third parties located outside Minnesota are required to recognize a Minnesota’s short form power of attorney document remains unclear.   This can be a concern for Minnesota residents who own real estate or other property in other states.  The attorney-in-fact may even run into problems getting banks, brokerage firms, or insurance companies located outside Minnesota to recognize the attorney-in-fact’s authority under the “short form” document.   In such situations, a general power of attorney (a specially drafted document, not the “statutory” or “short form” document), can be useful.


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Have questions about the need for a Power of Attorney?  Give us a call or send us an email.