What is a Durable (Financial) Power of Attorney?

A Durable Financial Power of Attorney (DPOA) in California is a document that grants an individual (also known as an agent or attorney-in-fact) the authority to make decisions of a financial nature for another person (principal). The Cal. Prob. Code §§4000-4545, also referred to as The California Power of Attorney Law, provides California's laws, regulations, and requirements for powers of attorney. Cal. Prob. Code §4124 states that the document should contain any of the following statements:

• This document will not be affected by the subsequent incapacity of the principal.
• This document shall become effective upon the incapacity of the principal;

In addition to language showing the principal's intent, they must also adhere to the legal requirements of creating a durable financial power of attorney in California. The requirements of a California Power of Attorney are:

• The principal and the agent must be adults of sound mind who can understand the consequences of their decisions.
• The POA must contain the date of execution.
• The POA must be signed by the principal or another adult in the principal's name in the principal's presence and under the principal's directive.
• The POA must be acknowledged before a notary public or signed by two acceptable adult witnesses.

Why Would You Need a Durable Financial Power of Attorney in California?

A durable power of attorney is an important document that protects the principal and their assets even after incapacitation. It is essential in estate planning. For individuals with a large estate and multiple assets, a durable financial POA is a tool of appropriate estate arrangement in the event of incapacitation. For frequent travelers, the durable financial POA assures the continuation of the principal's financial responsibilities, such as tax requirements, property transactions, banking needs, etc. The DPOA can cover a range of financial needs tailored to the principal's preferences. Some other reasons they are necessary include:

• It helps avoid ambiguity: A durable financial POA authorizes an agent to handle all or certain financial aspects of a principal's life. Thus, in the event of incapacitation, the decision maker and the exact decisions to be made are already apparent, removing the need for the principal's family or close friends to file for guardianship/conservatorship.
• It protects the principal's desires: In the time of incapacitation, the principal's financial preferences must be known and respected. Acquiring a durable financial POA allows the principal to share their wishes and hold the agent accountable for the performance.
• It saves time and money: If sudden incapacitation occurs and decisions need to be made quickly, a durable financial POA saves time for all interested parties, as they will avoid the expensive and time-consuming process of applying to the court for guardianship.

How to Use Durable Financial Power of Attorney in California?

For an individual to successfully use a durable power of attorney in California, it needs to be valid. This means it has to meet all legal requirements. Firstly, the power of attorney must be in writing. The state of California has a Statutory Form of Power of Attorney, which requires that the POA contain language expressly showing the principal's intent to be durable. For example, "This document shall continue to be in effect even though I become incapacitated". Using similar language will suffice.

After having the appropriate language, to be executed appropriately, the California financial DPOA must be signed by the principal and the agent in the presence of a notary public or two credible independent witnesses. In this instance, a credible independent witness can comprehend their actions and is not the principal's family or any other interested party. While notarization of the durable financial POA is not legally required by state law, it is often necessary for real estate transactions because it confirms the document's validity.

A durable financial power of attorney is often required to be recorded at the County Recorder's office for real estate transactions.

Who Should be Selected as The Agent for This Type of P of A?

A durable financial POA is a document that carries a heavy weight of responsibility for an agent and immense vulnerability for the principal. A principal must focus on certain qualities when determining who to select as an agent in a durable financial power of attorney. The agent should be someone the principal trusts implicitly to always act in their best interest. This individual should also have a proven track record of reliability and loyalty to the principal. In addition to being trustworthy, an agent should also be willing to carry out the responsibility of being an agent. However, if an agent is unwilling to perform their tasks, a DPOA provides for co-agents and alternate agents who can step up and act as needed.

An agent should be competent. After being trustworthy and willing, an agent must be able to carry out the tasks metered out by the principal in the durable financial power of attorney (DPOA). For example, a DPOA for tax purposes or the trading of stocks has to have an agent who is well-versed in such matters. The inability of the agent (s) to carry out their responsibility essentially makes the DPOA difficult to use, and the document may have to be revoked.

Who Can Be an Agent?

The Cal. Prob. Code, §4200, gives only one strict legal requirement for who can act as an agent. An attorney-in-fact must have the capacity to contract. This means that they must be over 18 and of sound mind (can comprehend the implications of their actions). However, in addition to having the capacity to contract, an agent should be trustworthy, reliable, and competent.

Can There Be More than One Agent?

Yes, a principal can have more than one agent. A principal may designate attorneys-in-fact and successor attorneys-in-fact to act on his behalf. The requirement for appointment is the capacity of each agent to enter into a contract.

Having multiple agents can have its advantages and disadvantages.

Advantages

• Backup: If an agent is unable or unwilling to perform their responsibilities, another agent can step up and act in the principal's interest.
• Expertise and Specialization: Having multiple agents means that the principal can assign each of them different responsibilities. This means the principal will enjoy the specific skill of an agent for a particular matter. For example, a trader on the New York Stock Exchange is more skilled at dealing with stocks than a tax specialist.
• Alleviates Burdens: Having multiple agents means that one individual is not responsible for making all the financial decisions. With multiple agents, each agent can focus on their responsibilities and will likely perform better than one person handling all the matters.

Disadvantages

• Frequent Conflict: The authority granted to two attorneys-in-fact is only exercisable by their unanimous action (Cal. Prob. Code §4204). This means that to make decisions on a particular matter, they have to agree, which increases the chances of frequent conflict.
• Potential Delay: If two or more agents share authority over a specific matter and there is no agreement, there will be a delay in the decision-making process, and the efficacy of the document will be affected.
• Coordination Challenges: When multiple agents are involved in a DPOA, they may face challenges coordinating their decisions. Proper and timely communication is key.
• Costs: Where the agents are to be paid for services rendered as agents, having numerous agents means increased payment costs.

Considering these advantages and disadvantages, it is essential to have a procedure for specifying the roles and responsibilities of each agent. The principal should be careful to:

• Use clear and concise language in the durable financial POA, outlining the duties of each attorney-in-fact
• Give specific instructions to each attorney-in-fact, avoiding any overlap in authority as much as possible
• Give clear instructions on how decisions should be made and conflicts settled in cases of shared authority
• Encourage open and constant communication among attorneys-in-fact

How to get Durable Financial Power of Attorney in California

An individual can follow the subsequent steps to get a durable financial power of attorney in California:

Choose an Agent: The first step in getting a DPOA is choosing an agent who has the legal capacity to contract and is trustworthy, willing, and competent. A principal may appoint multiple agents in a durable financial power of attorney.

Decide the scope of authority: Having chosen an agent, a principal must carefully decide what authority to give the agent and the extent of their powers. This decision should be taken after careful deliberation, especially if the principal has multiple agents.

Drafting the Durable financial POA: A principal may draft a DPOA by themselves. However, given the potential complexity of the document as well as legal requirements, it is better to consult an attorney to draft the durable financial power of attorney. Deciding on an attorney can attract costs ranging between $200-$600 depending on the principal's needs, but an attorney will ensure a smoother drafting process. Alternatively, California has free online services for compliant, durable forms of financial power of attorney. Individuals should exercise caution in using such sights and ensure that their DPOAs meet all their needs and are legally compliant.

Signing the DPOA: Once the document is drafted, both the principal and the agent must sign it. The principal must sign the POA in the presence of a notary public or two credible adult witnesses. An agent or attorney-in-fact cannot be a witness.

Notarizing: In California, a durable financial POA must be notarized for real estate transactions. The cost of notarization ($15) should be factored into the cost of a durable financial POA.

After completion, the durable financial POA should be stored safely and updated regularly as circumstances change. Alterations and updates will attract minor costs compared to the costs of re-drafting a DPOA. The extent of the alteration and the attorney or company consulted determines the costs.

Recording (optional): A principal can record a durable financial POA. California recording fees are usually $91 for the first page and $3 for each subsequent page. Or $14 for the first page and $4 for each subsequent page if the document is exempt by state law. Recording a durable financial POA bolsters the document's validity and helps protect against fraud.

How to Write a Durable Financial Power of Attorney in California

When writing a durable financial power of attorney in California, the document must contain language showing the principal's intent for the POA to be valid upon or continue after incapacitation. For example: "This document will not be affected by subsequent incapacity of the principal" and "This document shall become effective upon the incapacity of the principal".

The document also has some required and optional fields:

Required Fields

• Principal's name and address.
• Agent's or agents' name and address.
• Grant of authority field where the principal selects the specific matters over which the agent (s) will have authority.
• Date of execution
• Notice to the person executing a durable power of attorney.

A sample of the notices for a principal and agent can be found at Cal. Prob. Code §4401

Optional Fields

• Special instructions field for giving any special instructions. For example, a separate date from which the durable financial POA will be effective; limiting or extending the scope of the agent's powers.
• Notice to persons accepting the appointment as attorney-in-fact, including the agent's name and signature.
• Designation of more than one agent, specifying whether they are to exercise authority jointly or separately.
• Certificate of Acknowledgement of a Notary Public.
• Provision for compensation if the attorney(s) receive compensation for services rendered.
• Extension or Limitation of authority given to the attorney(s)-in fact.

Individuals creating or participating in a durable financial POA should carefully read through the document before signing. The principal and the agent must also carefully review the document before signing to ensure it accurately reflects the principal's wishes and is legally compliant.

How Often Must I Update My Durable Financial Power of Attorney?

There are no legal requirements for how often a durable financial power of attorney in California. However, certain factors may necessitate updating or amending a durable financial power of attorney. They are:

• Change in a financial situation: A change in the economic situation of the principal, such as the acquisition or loss of monetary assets, could necessitate an update of the durable financial POA
• Change in personal situation: Should the principal marry, divorce, or adopt a child, they may want to update their durable financial POA.
• Change in health situation: If a principal experiences a significant health change, such as a sudden health decline or a positive change in their health, they may need to alter the DPOA.
• Change in law: If the law changes affecting the validity of the POA, it will have to be updated.
• Changes in attorney(s)-in fact: In the event of unwillingness or inability of the attorney(s)-in fact, the durable financial POA will have to be updated to reflect the change in attorney(s)-in fact.

A principal can update their durable financial POA by executing a new DPOA or by amendment through the same formalities as the original. This means they will have to acknowledge in the presence of a notary public or sign in the presence of two credible witnesses. When updating a durable financial POA, the principal may consult an attorney to make the process easier. The principal should also carefully read through the document to avoid any mistakes.

Does the agent have to Follow the Principal's Wishes in Durable power of attorney?

No, the agent does not have to follow the principal's wishes save an express agreement in the durable financial POA. According to Cal. Prob. Code §§4230-4232, the agent does not have a duty to exercise authority except when specified in the POA agreement. However, once that agreement is made, the attorney-in-fact has a legal duty to act solely in the principal's best interest and avoid conflict of interests. This legal duty compels the agent to follow the principal's wishes to the extent of authority granted in the durable financial POA. Once an agent signs the durable financial POA, they assume fiduciary responsibilities and are open to legal action if, without good reason, they fail to perform as specified in the durable financial agreement.

It is paramount that a principal and their agent engage in open and constant communication. The principal should be updated on the decisions taken on his behalf. Also, the agent should fully know the principal's wishes and expectations.

What Decision-Making Power Does The Durable P Of A Grant The Agent?

A durable financial power of attorney in California grants the agent the power to make numerous financial decisions. The decisions include but are not limited to:

• Real property transactions: Buying and selling real property
• Handling Bank accounts: Transferring money to and receipt of money into the principal's bank account
• Stocks and bonds transactions: Trading in stocks and bonds on the principal's behalf
• Management of assets: Cars, landed property, gold, etc.
• Estate planning involves making financial gifts, funding trusts, and executing other beneficiary transactions on the principal's behalf.
• Tax Matters
• Insurance and annuity transactions

The agent's powers and authority are limited as specified in the durable POA. An attorney-in-fact must follow directions as specified by the principal in the DPOA. A principal can specify the scope of an agent's decision-making power in a durable financial POA by using the "special instructions" field and adding any language having the same effect.

When Does The Durable Financial P Of A Start, And How Long Does It Last?

In California, a durable financial POA becomes effective upon the principal's signature on another date specified by the principal in the DPOA. This type of POA remains in effect indefinitely unless a particular event is specified to terminate it. Alternately, the POA will remain in effect until it is revoked. Changes to the principal's financial or living situation may affect the duration of the DPOA. For example, a sudden loss or gain of financial assets could warrant an update or revocation of the document. To avoid ambiguity, the date of execution and the duration of the POA must be clearly and concisely stated in the agreement.

Can the Durable Financial P of A Be Revoked?

Yes, durable power of attorney in California can be revoked. Under Cal. Prob. Code § 4151, a principal may revoke or terminate the Durable Power of Attorney if proven incompetent. Revocation must follow the same process as execution.

In the event of revocation, the principal must notify their agent (s) and other relevant parties, such as banks and other relevant financial institutions, that possess a copy of the durable financial POA. If the DPOA was recorded, the revocation must also be recorded.

If the durable financial POA was filed with the Franchise Tax Board, the principal must fill out a Power of Attorney Declaration Revocation (FTB 3520-RVK), which is used to revoke a POA on file with the Franchise Tax Board in writing.

Nonetheless, California protects them from any probable liability if an attorney-in-fact and any other relevant party does not receive a notice of revocation.