Being able to handle another person’s financial affairs requires appropriate legal documentation.  A durable power of attorney for financial matters (DPAFM) is the legal tool which lets people name who will speak for them should they become incapacitated and unable to speak for themselves. The person who signs the DPAFM is the “principal,” while the person chosen to act on the principal’s behalf is the “agent.”

A DPAFM must be very specific in defining the powers it is authorizing.  For example, the agent may be given the legal right to manage, dispose of, sell and convey the principal’s real property or use it as security to borrow money. The agent may also be given the right to make decisions about where the principal will live, meals and transportation, household employees, and suitable recreation and entertainment.

In California, there are three ways to prepare a DPAFM:

  1. Pre-printed and software forms
  2. Self-drafted forms that include the templates set forth in the Probate Code, and
  3. Attorney-drafted forms.

Most pre-printed and software forms are too general to properly identify the principal’s property or define the agent’s powers. On the other hand, template forms include a list of provisions that the principal either checks or crosses out. Although they do provide a space for the principal to add special instructions, it is the principal’s responsibility to make sure that requested power limitations or authorizations are clear.

Regardless of whether the DPAFM is preprinted, self-drafted, or prepared by an attorney, issues may arise if someone questions its validity.  Relatives, friends, or even government agents have the right to file court petitions that question whether the principal was clearheaded enough to understand the DPAFM when it was signed. They may also file petitions that question whether the agent improperly transferred property. If such allegations are true, the agent may be criminally charged with fraud and/or embezzlement, prosecuted for elder abuse, and sued in civil court.

It is for these reasons that attorney-drafted DPAFMs provide the principal and agent with unique protections. Such forms must include confirmation that the principal obtained the attorney’s advice before deciding to sign the DPAFM. Therefore, should problems arise, the court’s primary focus will be on the attorney. Even if the agent improperly transferred property, if it can be shown that he or she did so by relying on that attorney-drafted form, the attorney will be liable, and not the agent.

In other words, compared to a do-it-yourself form, the legal security and clarity that are required by an attorney-drafted DPAFM may well be worth its higher cost.