What is a Durable Power of Attorney?

Dear Readers:

On occasion, we skip our usual letter and response format to discuss topics that we feel are important to everyone. This is one of those times.

A Durable Power of Attorney is a legal instrument in which you may appoint someone you trust as your agent, or “attorney-in-fact.”  Your agent then has the legal authority to go forth and work your will. You agent can use your power of attorney to conduct business on your behalf, such as dealing with your income taxes, retirement accounts, the phone company, banks, brokerage firms, etc. Simple, isn’t it?

It’s not so simple. Banks and other financial institutions are notorious for not accepting powers of attorney other than their own forms. CalPERS won’t let you initiate your spouse’s retirement, if he or she is disabled, with a power of attorney other than their own form. Insurance companies frequently deny perfectly valid powers of attorney because they don’t include specific language related to insurance. Sometimes, companies will even claim that a power of attorney is too old and can no longer be used.

Most of the time, when a company claims that a power of attorney is invalid for what you want to use it for, they are lying to you, and they are in violation of California law.

Why do they do this? We have a theory. Banks don’t like to make mistakes, because that can be expensive. Banks don’t allow employees, even managers, to exercise discretion, because that may lead to mistakes. Bank employees are allowed to accept their own forms, but perfectly valid and legal powers of attorney usually must be forwarded to the legal department for review. To minimize costs, a bank’s first line of defense is to reject a power of attorney out of hand.

There are several solutions available to you. The least expensive is the path of least resistance. Use the company form, if you are able to. It’s stupid and legally unnecessary to have to do this, but it works.

If you can’t use the bank’s form, maybe because your parent or spouse is already incapacitated, see a lawyer. We have developed a threatening letter that induces bank managers to call us. The letter explains that if they don’t accept the power of attorney, you’re going to sue them, and the law provides for the payment of your lawyer fees. It’s remarkably effective, because the law in on our side.

The last thing you can do is to keep your power of attorney up to date. Even though an older power of attorney is valid, a newer one with more specific language is more readily accepted. And whatever you do, don’t lose an original power of attorney - copies are useless, other than copies certified by a Notary Public.

Len & Rosie

You need an estate plan, even if it’s a simple will.

Dear Len & Rosie,

I would like some advice. My friend and I bought a home 24 years ago. We are listed as half owners on the Deed of Trust. Last October, my friend passed away. We never had the home listed as joint tenants on the Deed. Am I going to have a problem having the Title changed into my name only? My friend didn’t have a will or any children. 

Dear Cathy,

First of all, don’t assume the home was not in joint tenancy. In your email, you referred to the Deed of Trust. This isn’t the deed to your home. Instead, a Deed of Trust is your mortgage lender’s recorded lien on your home that gives your lender the right to have your home sold in a foreclosure if you default in your loan payments.

The deed you need to examine should be a “Grant Deed”, or sometimes a “Corporation Grant Deed” or “Individual Grant Deed.” If you do not have this document, you can obtain a copy from your local County Recorder for a very small fee. Do not bother paying $20 or $25 for a certified copy. You’ll never need one. Just get a copy.

If the deed says, “Cathy and Friend, as Joint Tenants”, or “Cathy and Friend, as Joint Tenants with Right of Survivorship” then it’s easy. All you need to do is to record your friend’s certificate of death with an Affidavit of Death of Joint Tenant. The property won’t even be reassessed under Proposition 13, because there’s a transfer exemption for transfers on death between cohabitants (you may need a lawyer’s help for this).

If the deed doesn’t say it’s a Joint Tenancy, then you have serious problems. If it’s not a Joint Tenancy, it’s a Tenancy in Common, and that means your friend’s half of the home belongs to his or her probate estate. Since your friend died without a will, his or her probate estate passes by “intestate succession,” the law about who gets what when someone dies without a will. The bad news is that’s not you, because you and your friend were not married or registered as domestic partners with the California Secretary of State. This means your friend’s family, even if they are distant relatives, are entitled to inherit your friend’s half of your home.

If this is the case, then your best bet may be to lie low and hope that nobody notices you’re not on title to the entire property. You will have to deal with this if you ever try to sell or borrow against the property, but you don’t have a duty to deal with the situation now. What you really ought to do is to review the deed to the home with a trusts and estates attorney.

Here’s the lesson for the rest of our readers: You need an estate plan, even if it’s a simple will, because if you don’t you may leave a giant mess behind that your loved ones may not be able to clean up.

Len & Rosie