Durable powers of attorney for property (POAFP)are a relatively recent innovation and a very useful tool permitted under Illinois law. Such powers allow a trusted third party to handle individual financial transactions for the creator of the POAFP. A POAFP can be effective from the moment of its execution, or from the time the creator becomes incapacitated. Whether to use mental incapacity as the trigger to the effectiveness of the power, or to declare the power to be effective upon execution,is a choice that the principal makes at the time of signing.
A POAFP is particularly useful where an individual does not have a living trust, or where there are assets outside the trust that must be administered. Obviously,under any circumstances, one must be very careful in selecting an individual to become one’s agent. Such a person should not only be trustworthy, but experienced and familiar with the type of transactions that he or she may be called upon to carry out for the principal.
In addition, the agent must be aware of the legal guidelines which govern their conduct and be willing to take on the responsibilities of the undertaking, which can be very time consuming. While agents are neither guardians nor trustees, they do have obligations that are very similar to those of a guardian or trustee, and must maintain accurate financial records of the transactions which they carry out under the power of attorney. Agents must be very careful not to take part in any transactions which might be considered to be self-dealing or of any financial benefit to themselves.
Powers of attorney for property are a relatively new vehicle and the law is clearly evolving in this area. Any peron who is considering either creating a power of attorney, or becoming an agent under a power of attorney should consult with their legal counsel in order to make sure they understand the nature and extent of the particular undertaking. The penalties for the failure to properly carry out their duties and responsibilities can be quite serious. In addition, the consequences to the family of the creator of the power, both in the form of irreparably causing injury to precious family relationships, as well as financial losses can be quite severe.