Powers of attorney give the agent the authority to act in place of the principal. A durable power of attorney is one that gives the agent the authority to act in the event the principal is incapable or incapacitated. Such powers of attorney may give the agent a broad scope of authority to do all act and to take all actions that the principal could take on the principal's own behalf(known as General Powers of Attorney). Or the authority may be limited to one or more specific transaction such as authority to complete the sale of principal's residence (known as Special Powers of Attorney).
Powers of attorney may be unconditional or springing. An unconditional durable power of attorney is effective upon execution. This creates a situation in which the agent may take whatever action the instrument permits whether or not the principal is financially incapable or incapacitated. The way is open for abuse. To limit the potential for abuse, it is the practice of many practitioners to limit the authority of the agent of an unconditional durable power of attorney by a letter to the agent stating the agent cannot exercise the agent's authority unless specifically directed to by the principal or when the principal becomes incapacitated or incapable as determined by the agent in consultation with the principal's physician. Other practitioners will advise the principal to have a third party hold the power of attorney until it is needed.
In many states and soon in Oregon, too, there are durable powers of attorney which become effective upon a specified future time, event or contingency. These are called "springing durable powers of attorney". On January 1, 2010, the law in Oregon will permit the use of springing powers of attorney. The written instrument must state the time, event or contingency and may designate a person or persons to make the determination whether the event or contingency has occurred. The instrument may also provide for the manner in which the determination is made. For example, the power of attorney may provide that the agent may make the determination only upon the written determination of the principal's physician that the principal is financially incapable. If no one is designated to make the determination or those who are designated refuse to make the determination, the Act allows for a physician to make it so long as it is in writing.
When effective, the new Act applies to powers of attorney executed before, on and after the effective date.
Powers of attorneys can be an effective tool for the management of the financial affairs of people who are financially incapable or incapacitated. But they have the ability, too, to be misused and abused to the financial detriment of the principal. A principal should only adopt a power of attorney after and in consultation with the principal's lawyer.
