Durable Powers of Attorney (Portfolio 859)

Tax Management Portfolio Durable Powers of Attorney, No. 859-3rd, contains basic information on durable powers of attorney (DPAs) and discusses many aspects of their creation and use for disability planning.

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Tax Management Portfolio Durable Powers of Attorney, No. 859-3rd, contains basic information on durable powers of attorney (DPAs) and discusses many aspects of their creation and use for disability planning. It provides a definition of the DPA and analyzes its development and evolution. Additionally, an overview of the Uniform Power of Attorney Act (“UPOAA”), promulgated in 2006 by the National Conference of Commissioners on Uniform State Laws, is presented throughout the portfolio. The analysis includes an examination of the agent-principal relationship and provides a comparison of DPAs to revocable living trusts. Issues discussed in depth include legal capacity, selection of an agent, deterring abuse of the DPA, relationships of agent to guardian or conservator, obtaining third party acceptance of DPAs, the differences between unconditional and springing DPAs, and the form and execution of DPAs, as well as many other topics. In addition, practical advice is provided for attorneys concerning setting up a DPA drafting system and on the pricing of customized DPAs. The portfolio includes extensive forms and practice insights which are intended to help practitioners implement the strategies and ideas of the text.
The Worksheets include a brochure describing DPAs to clients, sample letters to clients and their physicians and to agents, a DPA preparation checklist, samples of a general DPA and a special DPA, and other forms and aids.
This Portfolio may be cited as Hook, 859-3rd T.M., Durable Powers of Attorney.


Andrew H. Hook, Esq.

Andrew H. Hook, CELA, CFP®, J.D. (1975), University of Virginia School of Law, is the President of the Hook Law Center. He practices in the areas of estate planning, elder law, estate and trust administration, Medicaid asset protection planning, and special needs trusts. Mr. Hook is certified as an Elder Law Attorney by the National Elder Law Foundation. He is a Fellow of the American College of Trust and Estate Counsel and a Fellow of the National Academy of Elder Law Attorneys. Additionally, Mr. Hook is the co-author of Representing the Elderly or Disabled Client, published by Thomson Reuters. He is a former President of the Special Needs Alliance, an organization of attorneys serving the needs of persons with disabilities. Mr. Hook is also a Certified Financial Planner™ professional. He is listed in the Best Lawyers of America registry.
Assistance with this portfolio was provided by Edward H. Miller, J.D. (2013), The University of Richmond School of Law. He is an associate at the Hook Law Center. While attending the University of Richmond School of Law, he served as Chairman of the University of Richmond Estate Planning Roundtable. Prior to attending law school, he worked for the Energy, Finance, and Info-Structure Team at White & Case. He is a graduate of Duke University's Executive Program in Financial Planning and the McIntire School of Business Summer Business Institute at the University of Virginia. Mr. Miller is a licensed life insurance and health insurance agent, as well as a registered investment advisor.

Table of Contents

Detailed Analysis

I. Introduction

A. Disability Planning

B. Early History

C. Recent Developments

D. Are Durable Powers of Attorney a Standard Form?

E. Approach

II. What Is a Durable Power of Attorney?

A. Definition and Background

B. General or Special Powers

C. Is the Agent Under a DPA a Fiduciary?

D. What Fiduciary Duties Does the Agent Owe the Principal?

E. What Duties Does the Principal Owe the Agent?

F. When Do Duties Arise?

G. Remedies for Breach of Fiduciary Duties

H. What Powers May Be Delegated by the Principal?

I. Practice Notes

III. Comparison of DPAs and Revocable Living Trusts

A. Funded Revocable Living Trusts

B. Advantages of a DPA

C. Advantages of an RLT

D. An RLT Does Not Eliminate the Need for a DPA

E. Practice Notes

IV. Relationship of Agent Under DPA to Guardian or Conservator

A. The Guardian and Conservatorship Statutes Raise the Stature of and Encourage the Use of DPAs

B. Revocation of a DPA by Conservator

C. Authority of the Conservator Over the Agent

D. Practice Notes

V. What Laws Should Be Considered in Drafting the Durable Power of Attorney?

A. The DPA Statutes of the Various States Are Not Uniform

B. Practice Notes

VI. Does the Client Have the Legal Capacity to Execute a DPA?

A. The Capacity Determination Is the First Step in Drafting a DPA

1. The Principal's Capacity

2. Principal's Physical Impairments

3. Agent's Capacity

B. Planning Techniques to Consider Where the Client Is Already Legally Incapacitated

C. How Do You Determine If the Client Has Legal Capacity?

D. Practice Notes

VII. What Type of DPA Should be Used?

A. Durable Powers of Attorney Can Be General, Special or Limited

B. Powers of Attorney Governed by the UPOAA

C. Practice Notes Concerning Choice of Type of DPA

VIII. Should the DPA Be Effective Immediately or in the Future?

A. A DPA Is Either Unconditional or Springing

B. Advantages and Disadvantages

C. Practice Notes Concerning Unconditional or Springing DPAs

1. Drafting Unconditional or Springing DPAs

2. Retaining Possession of the Original DPA

3. Escrow Agreements

IX. Who Should Serve as Agent?

A. Who May Be Appointed an Agent?

B. Selection of the Agent Is Critical

C. Should the Client Appoint Co-Agents?

D. Should a Special Agent Be Appointed for Certain Sensitive Actions?

E. Should a Bank, Corporate Fiduciary or Other Professional Be Appointed as the Agent?

F. Should the Client Name Successor Agents?

G. Can the Principal Authorize His Agent to Appoint Sub-Agents or Successor Agents?

H. Practice Notes

X. What Administrative Provisions Should Be Included in a DPA?

A. Compensation

B. Does an Agent Under a DPA Generally Have an Obligation to Act?

C. Self-Dealing

D. Commingling of Funds

E. Prudent Investor Rule

F. Healthcare Powers

G. Legal Counsel

H. Practice Notes

XI. Should the Principal Authorize the Agent to Make Gifts of the Principal's Assets?

A. Authority to Make Gifts

B. Power to Make Gifts of the Principal's Assets Can Be Valuable

C. Does the Power to Make Gifts Have Tax Implications?

1. Tax Consequences for the Principal

2. Tax Consequences for the Agent

a. General Power of Appointment

b. Incidents of Ownership in Life Insurance Insuring the Agent's Life

D. Practice Note

XII. What Authority Should Be Granted Concerning Trusts?

A. Creation of Trusts that Dispose of the Principal's Assets at Death

B. Funding, Withdrawing Assets from, Amending and Revoking an RLT Created by the Principal

C. Practice Note

XIII. What Authority Should Be Included in the DPA Concerning Taxation?

A. Permissible Authority

B. Acceptable DPA Documents

C. UPOAA Authority Regarding Taxation

D. Practice Note

XIV. Third Party Acceptance of the Agent's Authority

A. Third Party Reliance Is a Prerequisite to an Effective DPA

B. Statutory Remedies

C. Protecting Third Parties

D. Practice Note

XV. Deterring Abuse of the DPA

A. Selection of Agent

B. Remedies for Abuse of the DPA

C. Statutory Disclosure Rules

D. Educating the Principal and Agent

E. Practice Note

XVI. Customizing the DPA to Meet Client Needs and Preferences

A. Revocation of Prior DPAs

B. Use of Photocopies of the DPA

C. Providing for the Principal's Incapacitated Family Members

D. Care for and Control of the Principal's Person

E. Protection and Indemnification of the Agent

F. Employment of Principal's Attorney

G. Instructions Concerning Principal's Residence

H. Professional Practices

I. Nomination of Guardian or Conservator for Principal

J. Pets

K. Loans to Family Members

L. Disclaimers

M. Ademption of Specific Gifts

N. Change of Principal's Domicile

O. Retirement Plans and IRAs

P. Real Property

Q. 529 Plans

R. Special Education

S. Practice Note

XVII. Form and Execution

A. DPA Must Be in Writing

B. Execution Requirements

C. Format Requirements

D. Recordation Requirements

E. Statutory Notices

F. Should You Rely on a General Authorization?

G. Drafting DPAs

H. How Many Originals Should Be Executed and Where Should They Be Stored?

I. Statutory Short Form DPAs

J. How Does an Agent Sign a Document on Behalf of the Principal?

K. Practice Note

XVIII. Revocation or Termination of the Agent's Authority

A. Is a DPA Revocable?

B. How Does a Principal Revoke a DPA?

C. What Other Events Terminate the Agent's Authority?

D. Protection of Third Parties

E. Practice Note

XIX. DPA Drafting System

A. Wise Investment

B. Improve Quality and Consistency

C. Importance of Using Technology

D. Contents of Drafting System

E. Attorney Fees

1. Customary Fees for “Form” DPAs

2. Effort Required to Draft a Customized DPA

3. Use of Drafting Systems

4. Pricing the Customized DPA

F. Practice Note

XX. Reviewing DPAs for Third Parties

A. What Are the Risks for Third Parties?

B. What Should Attorneys Look For when Reviewing DPAs?

C. Affidavits, Opinions, and Translations

D. Practice Note

XXI. Conclusion

Working Papers

Working Papers

Table of Worksheets

Worksheet 1 Client Brochure

Worksheet 2 DPA Drafting Checklist

Worksheet 3 Letter to Principal's Physician Concerning Mental Capacity

Worksheet 4 Escrow Agreement

Worksheet 5 General DPA

Worksheet 6 Special DPA for the Sale of Real Property

Worksheet 7 Statutory Form Power of Attorney

Worksheet 8 Affidavit of Succession by Successor Agent

Worksheet 9 Revocation of DPA

Worksheet 10 Affidavit that DPA Has Not Been Revoked

Worksheet 11 Letter of Guidance to Agent

Worksheet 12 Agent's Certification (Optional)

Worksheet 13 Execution of DPA by a Disabled Principal

Worksheet 14 Third Party Review Letter

Worksheet 15 Letter Demanding Accounting



Statutes and Regulations

Uniform Acts and Restatements