Durable Powers of Attorney

8 August 2019

By Cowles Liipfert

A Power of Attorney is a legal document in which a person (the “Principal”) gives someone else (the “Agent”) the power to act on behalf of the Principal as set forth in the Power of Attorney, perhaps doing things such as writing and signing checks, or even signing deeds or tax returns.  Those documents can also include the authority to do many other things, and not just basic functions.

If the Principal becomes incapacitated, the Agent’s authority under an ordinary power of attorney is revoked as a matter of law, but if the Power of Attorney is “Durable,” i.e. it expresses the Principal’s intent that it shall remain in effect if the Principal becomes incapacitated, it will not be revoked if the Principal becomes incompetent.

Until January 1, 2018, North Carolina law required a Durable Power of Attorney to be recorded in the office of the Register of Deeds, but that is no longer a legal requirement for documents executed after that date, except in the case of real estate transactions, in which case powers of attorney must be recorded.

Depending on the language in the document, Durable Powers of Attorney can be effective immediately, even if the Principal is capable of acting for himself or herself, or they can be “springing,” i.e. the Power of Attorney becomes active only upon the occurrence of a future event, such as when the Principal becomes legally incompetent.

The North Carolina General Statutes provide a statutory Short-Form Power of Attorney which may be used, instead of a form listing detailed descriptions of each specific power.  If you have an old statutory Short-Form Power of Attorney executed before January 1, 2018, it must be recorded at the Register of Deeds office to be actively used.  After January 1, 2018, you should not sign a durable power of attorney which uses the old statutory short-form language, because the laws have been changed.

Both the old and the new Statutory Short-Form Powers of Attorney are limited in the scope of authority granted to the Agent to act on behalf of the Principal and we recommend that you have a longer, more detailed document which grants specific authority to perform certain types of transactions on your behalf, that are not specifically covered in the short-form documents.  A document which says something like “I authorize my Agent to do anything which I could do if I were present and acting for myself” does not grant the broad authority for which it seems to be intended, because certain powers must be explicitly specified, in order to be effective.  The authority of the Agent to act on behalf of the Principal should be clear and unambiguous.  

Example: A lady signed a durable power of attorney a number of years ago.  She now suffers from Alzheimer’s and her family wants to do long-term planning, which could include some family gifting.  Unfortunately, the old power of attorney does not give her agent the power to make gifts.  Also the old power of attorney does not contain the language required by the IRS which would authorize the agent to represent her with the IRS.

Consequently, we recommend that you not rely on the statutory Short-Form Power of Attorney, especially old ones, but even new documents signed after January 1, 2018, on the mistaken assumption that the document will be comprehensive and will cover all of your needs.  To the contrary, we recommend that you consult with an attorney and have a power of attorney drafted which meets all your specific needs.

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