The general durable power of attorney is an important and powerful document. New Jersey law, N.J.S.A. 46:2B8-1, et seq., provides this mechanism so that you may appoint another to handle your affairs. A durable power of attorney is effective during the lifetime of the person who signs it (the “principal”). Its purpose is to appoint another person (or multiple people) who can stand in the shoes of the principal and act on their behalf. The designated person is referred to as the “agent”.
In a general durable power of attorney the principal designates one or more people to act on the principal’s behalf. If the principal appoints more than one persons, he can require that the designated agents must act together, or structure the power so that each person can act alone without the knowledge or consent of the co-agent. Appointing two agents who can act individually can however have drawbacks. If both do not agree on a proposed course of action, it can lead not only to discord and infighting, but to litigation. If one agent feels it is in the principal’s best interest to sell his home, but the co-agent disagrees, the co-agent might bring an action in court to block the sale. The situation would be more difficult if one of the agents had signed a contract for sale with a buyer, as now, the buyer may join the litigation to force the sale. If the agents were required to act jointly they would be forced to come to an agreement before third parties and/or the courts were involved. Finally, it is always recommended that the principal name a successor agent who can act if the first named agent is unwilling or unable to do so.
The most difficult decision the principal has is deciding who to name as agent. Since the agent under a power of attorney must handle the financial affairs of the principal, it is important to choose someone who is organized, responsible and financially savvy. Obviously, it should be a person the principal trusts implicitly. The principal should speak with the proposed agent prior to the appointment to ensure that the person would be willing to take on the responsibilities if it becomes necessary.
However, it is important to make this difficult decision and execute a power of attorney because without one there is no one who can make financial decisions for person once they are no longer capable of handling their own affairs. Unless appointed by a power of attorney, even a spouse does not have the power to handle her spouse’s affairs. For example a spouse cannot access IRA or 401K accounts, cannot mortgage or sell real estate and cannot speak to social security or the motor vehicle commission. Once a person is incapacitated and no longer able to handle their own affairs, they in all likelihood no longer have the capacity to execute a general durable power of attorney. At that point, the only option is to have a guardian appointed for the incapacitated individual. To appoint a guardian, a court action is required which, even if it is uncontested takes considerable time and expense.