Financial Disaster Awaits Without This Simple Legal Document: Every year, thousands of families face financial paralysis when a loved one becomes incapacitated without proper legal documentation. According to estate planning attorney Harry Margolis, author of “Get Your Ducks in a Row,” this crisis is entirely preventable with one simple document: a durable power of attorney.
The Costly Alternative to Planning Ahead
Without a durable power of attorney, families must navigate the expensive and time-consuming court system to gain control over an incapacitated person’s finances. “They have to get appointed your guardian or your conservator,” Margolis explains. “That appointment takes time. It costs money and it’s administratively cumbersome.”
The process can take weeks or months, during which no one can access accounts, pay bills, or make critical financial decisions. Even worse, the court—not the incapacitated person—ultimately chooses who will manage their affairs, potentially leading to family disputes.
“While they’re doing all this, no one can act for you. So it can take weeks or months depending on what happens. And also you don’t choose that person.”
Choosing the Right Agent
The most critical decision involves selecting someone trustworthy with the time and ability to handle financial matters. Most people choose their spouse or an adult child, though Margolis notes that some situations may require professional help.
“Sometimes you don’t have anybody in that role and that can be problematic,” he says. In such cases, families might consider hiring an attorney willing to serve as agent or establishing a trust with a professional trustee instead.
Comprehensive Powers for Complete Protection
A properly drafted durable power of attorney should grant broad authority to handle all financial and legal matters. While a simple one-paragraph document could theoretically suffice, financial institutions typically demand detailed power listings.
“The documents end up being pretty long,” Margolis acknowledges. “Some states have statutory forms and those are good to use because the banks and other institutions are used to seeing them.”
The document should enable your agent to pay bills, manage investments, handle tax matters, and make retirement account withdrawals. However, some people choose to limit gifting powers to prevent potential abuse.
Overcoming Financial Institution Obstacles
One of the biggest practical challenges involves getting financial institutions to accept your durable power of attorney. Banks and investment firms often employ what Margolis calls the “staleness doctrine”—rejecting older documents even though no such legal requirement exists.
Major financial institutions like Fidelity and Schwab often have their own power of attorney forms. Margolis strongly recommends obtaining and executing these institution-specific documents alongside your general durable power of attorney.
“If you have investment accounts at a Fidelity or Schwab or any place like that, ask them if they have their own form,” he advises. “They’re more comfortable with their own forms.”
Strategic Agent Selection
While naming one agent seems logical, Margolis recommends appointing two people “jointly and severally.” This approach provides backup coverage while allowing each agent to act independently when needed.
“The advantage of two is you have backup,” he explains. “So if one person is not available, the other person can serve.” However, he cautions against appointing more than two agents due to communication complications.
Don’t forget to name alternates in case your primary agents become unavailable.
Immediate vs. Springing Powers
A crucial decision involves whether to create a “springing” power of attorney that only activates upon incapacitation, or one that takes effect immediately. Despite the intuitive appeal of springing powers, Margolis generally recommends immediate effectiveness.
The problem with springing powers lies in proving incapacitation. Banks will demand medical documentation before honoring the document, creating additional barriers during already stressful situations.
Documentation and Storage
Unlike wills, which have only one original, you can create multiple original powers of attorney. Margolis suggests preparing two or three originals: one for your records, one for your attorney, and one for your appointed agent.
Maintaining Control Through Revocation Rights
Despite granting broad powers, you retain complete control over your durable power of attorney. You can revoke the document at any time by simply notifying your appointed agent that their authority has been terminated.
This flexibility allows you to update your arrangements as circumstances change, whether due to relationship changes, relocations, or evolving financial needs.
The Bottom Line
Creating a durable power of attorney represents one of the most cost-effective insurance policies available. Watch this video to learn how Financial Disaster Awaits Without This Simple Legal Document. Find more FinStream videos featuring Estate Planning Attorney Harry Margolis at this link https://www.finstream.tv/featured/harry-margolis/ or on our YouTube Channel: https://www.youtube.com/@finstreamtvUS