What is the procedure for executing a Durable Power of Attorney in the state of X? Should it be done by a lawyer, or can one do it by oneself?
A power of attorney is a legal document which designates a person, your agent, to handle legal, tax and financial matters if you cannot do so. In most states a power of attorney that you sign in front of a notary and perhaps a witness is valid. There is no legal reason in most situations to have a power signed in front of a lawyer. That being said there are tremendous practical reasons to have a lawyer prepare and review the document before you sign it. It's not the signing that needs a lawyer, but the planning and drafting. Lots of folks will disagree with that comment and suggest that its just a lawyer's way of making money. They're wrong. These same folks will recite chapter and verse of how they bought a cheap pre-printed form and have never had a problem. Might be so, but the incidences of abuses under powers of attorney are huge. The incidences of people not having the planning done right so that the documents don't provide the protection needed are just as common. Let's take a look at why.
Powers can be the most significant legal document you ever sign. Some powers of attorney authorize agents to make unlimited gifts. Yep, to give away everything you have. Well, that can be a good thing, or it could be quite disastrous, depending on the circumstances. A power can permit an agent to change the beneficiaries of your IRA, retirement plan and insurance. Again, that could be good or bad. For many people their power of attorney is far more important than a will. There are boat loads of stories of agents ripping off someone's money using a power. Now if you want to save a few bucks and not have a lawyer involved, that's OK, just understand the downside. Those wonderful self help legal websites that purport to save you money on lawyers neglect to tell you these risks or how to deal with them.
The flip side of the power of attorney coin is will the document enable you to do what you really need? Many forms just don't. Will the gift provision permit you to fund a 529 plan for a grandchild? Many won't. What about front loading 5 years of 529 plan gifts? If you have an adult child can your agent help out that child financial if you're incapacitated? Does the power have the appropriate language so it will remain valid even if you become ill or disabled? Not all do. What if you own real estate and want to consummate a 1031 like kind exchange or donate it to a charitable remainder trust? Will your power permit those actions by your agent?
The toughest call is how to tailor these to opposing issues --- restricting an agent to minimize (you can never avoid it) risks of abuse, while simultaneously giving the agent enough power to address the issues you and your loved ones really need.
Now if you still want to sign a power without a lawyer, or go to one of those legal websites that will help you fill in a "form" for 50 bucks, have fun, but do it with your eyes wide open (nothing to do with the movie with similar name starring Tom Cruise).
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