Most people are familiar with the concept of a will and/or a trust. What most people fail to understand is that those documents only come into play when you are dead. What many people fail to have is a durable power of attorney. Many people saw “Rocky 5” (to be clear the author follows the popular belief that “Rocky 5” didn’t actually happen) and learned that Rocky’s brother-in-law, Paulie, signed over Rocky’s power of attorney to his accountant, thus squandering his fortune and putting the public in fear of signing over such powers. However, that is not an accurate portrayal of how most power of attorney documents work. I will describe a few circumstances and times where they are actually very helpful. The thing to take away from this article is that a power of attorney document should not be considered without complete trust in the person taking such a responsibility.
Overall estate plan. Many lawyers, including myself, encourage families to have durable power of attorney (DPOA) documents not only for medical decisions but also for business decisions. A properly drafted DPOA will allow for someone to step in and make decisions for someone when they are unable to do so. The term “durable” means that the document will not be terminated upon the incapacity of the principal.
Many times, these documents could be needed in an emergency situation like a car wreck or an injury on the farm. More often than not, they are used when a person lacks the capacity and/or no longer desires the day-to-day work of their own financial affairs. DPOAs will sometimes give very specific instructions to the person appointed as DPOA to perform certain tasks, and sometimes they can be very standard and boilerplate.
A potential issue occurs when the person appointed lacks the knowledge that they are even appointed, and thus, what the principal wants from them. If you appoint someone as your DPOA and fail to give them directions, you are setting yourself up for failure. One thing to remember is that if mental capacity is not an issue, you can always revoke a DPOA and remove that person. Often, people ask if they can appoint someone for a limited task or a specific thing. That can be very helpful when someone is out of the country or needing to deal with an entity that they are unfamiliar with. In this situation, a DPOA drafted by an attorney many not even be helpful as that entity may require their own form.
Specific DPOAs. Many farm operators are familiar with gathering signatures for their local Farm Service Agency (FSA) office or crop insurance agent. When someone has 37 landlords, chasing signatures can become quite burdensome. Thus, a specific DPOA could become very helpful to both the landlords and the operators. While these documents are specific to their specific agencies, what a person is actually signing may not be specific.
For example, while the FSA DPOA has specific options to choose from, it also has a box to check for all current and future programs. While that may seem like the easier approach, like all things, there could be ramifications. If you give an operator the ability to sign up for all current and future programs, you are doing just that. If they decide to sign some or a part of the farm up for the Conservation Reserve Program, they can technically do that. This, again, is something people rarely think about when they are signing a DPOA over to someone, because before they even consider doing it, they should have full trust in them.
DPOAs can be a very helpful and convenient tool for the farm and daily life. As with anything, communication is key to making sure both parties are aware of the expectations and that there is a strong level of trust prior to appointing someone their DPOA.
John M. Kragt is an attorney with the law firm of McGuire, DeWulf, Kragt & Johnson P.S. He and his partners work with farm families and other agricultural businesses for the majority of their needs throughout Eastern Washington. The firm has offices in Davenport, Odessa, Ritzville, Colfax, St. John, Rosalia and Fairfield.