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Guardians & Powers of Attorney

If there is no surviving spouse, then one of "the heirs" of the decedent may be appointed as guardian of minor children, if the decedent has made no appointment. This leaves considerable uncertainty about who will step forward and who will be appointed.

The purpose of a power of attorney is to authorize someone else to act for you if you are not able to act for yourself. You may be away (on vacation or stationed abroad) or you may be ill. As you get older and can no longer take good health for granted, you may wish to give power of attorney to spouse or child.

Our form of power of attorney is very broad; we intend it to be able to cover almost any problem which may arise, from paying the bills to selling the house. Such authority should not be given unless you have complete trust in the attorney-in-fact (the person to whom you give power of attorney).

Our power of attorney is "durable," which means that it remains effective if you become incompetent. Until the common law was changed by statute in New Jersey, incompetency revoked a power of attorney, which made it useless at precisely the time when it was needed most. Now, by statute, if a power of attorney contains the language "The validity of this instrument shall not be affected by the disability of the principal," it is durable. (You, the person signing the power of attorney, are the principal.)

No one can guarantee you that all third parties will recognize and accept a power of attorney. It is not unusual for a bank or broker to want its own form signed. To date, we have been able to persuade third parties to accept our form, sometimes after argument. A recent statute now requires New Jersey banks to accept powers of attorney which contain a statutory reference. We have incorporated this reference in our form.

For real estate transactions, the power of attorney must be recorded. Sometimes third persons request that it be recorded to make revocation less likely. Our power of attorney is in "recordable" form.

We recommend that you sign several copies of the power of attorney. If the only copy is being recorded, or if each bank demands the only copy, you would be inconvenienced.

You may revoke a power of attorney at any time by notifying the attorney-in-fact. This should be done by writing. We recommend that you retrieve and destroy all copies, if that is possible. If the power of attorney has been recorded, the revocation must also be recorded. Revocation is prospective only; it does not undo what has been done prior to revocation.

Death of the principal terminates the power of attorney. Authority then passes to the decedent's executor.

The attorney-in-fact is a fiduciary, bound to act in the interest of the principal. The attorney-in-fact is authorized to act, but is not required to act (although he or she may feel obligated to do so).

The attorney-in-fact has no implied authority to make gifts to anyone, even if that may be good estate planning. Any authority to make gifts must be contained in the power of attorney and must be explicit. Our standard form does not contain such authority for two reasons: first, few persons desire to give such authority; and second, it creates a "general power of appointment" in the attorney-in-fact, so that if the attorney-in-fact dies, his estate is deemed to include the assets of the principal - and that can cause some undesired death tax problems.

It is critically important that the attorney-in-fact keep complete and detailed records of all receipts and expenditures. He must be able to explain to the principal what he has done. Should the principal die, the attorney-in-fact must be able to show the executor and beneficiaries what has been done. We recommend a separate bank account for all receipts and disbursements. Make copies of all checks received and bills paid, to back up the checkbook record.

In cases where the principal is ill and elderly, and a child acts as attorney-in-fact for a lengthy period, it may be wise to periodically present the account (the records) to the principal for written approval. This will reduce the exposure of the child to inquiries by others who may be suspicious or hostile. There will be fewer years, records and dollars to argue about. Approval by the principal releases the attorney-in-fact from liability to the principal, and from liability to the heirs of the principal.

Of course it is always possible for an attorney-in-fact to act in his or her own interest, rather than in the interest of the principal. If the principal is incompetent, there may be no one to object. Objection by the heirs, after the principal's death, may come too late. For that reason the power of attorney should be given only if you have complete trust in the attorney-in-fact.

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