A common law power of attorney is a document that authorizes an agent to act on behalf of the principal in a legal or business matter. The forms are usually similar and their basis comes from historical use. In our law firm, we like to joke that the first attorney in the history of time created all possible legal documents and every attorney to follow took and altered them to suite their purpose. A Statutory Power of Attorney differs from a common law power of attorney in the form and provisions of the Statutory Power of Attorney are provided by the laws of your state. These statutes also provide directions as to how they are to be accepted and absolution to the accepting party from any liability for such acceptance. The problem with statutory power of attorney documents or the common law version is they cannot always be relied upon.

Jeff and his wife Ellen recently came to my law office depressed and confused. Jeff was 55 years old and had been diagnosed with Alzheimer's disease two years earlier. He was now to the point where his competency to handle his financial affairs was in question. Getting Alzheimer's is always very sad but this case was compounded by their two children under the age of 10. Jeff adored these children but it was getting to the point that he did not recognize them at times.

Jeff and Ellen have been clients for eight years. When we first met I taught them the difference between having a Will and a Revocable Living Trust. We talked about the Living Trust as the best choice because if they held their assets in trust during their lifetime it would provide for property management should either or both become incapacitated. Jeff did not want to spend the extra money for trusts because he thought there was no chance of a health incapacity anytime soon. He could always have a trust later.

They decided to go with Wills and statutory power of attorney documents for each in case they were disabled. I counseled them that larger national financial organizations were beginning to not accept state statutory power of attorney documents and they should not rely on one. They understood but were willing to take the risk.

They were in my office now because the very thing I counseled them on had occurred. Their bank will not allow Ellen to access an account that was only titled to Jeff. Since their marriage, the second for both of them, they had always kept their finances separate. The bank said it was too old and they would need a new one. It was now questionable if Jeff had the capacity to sign a new document.

I told them I would work with the bank and the other places Jeff had investments to honor this document but my fees would probably come close to one thousand dollars. If we had to open an adult guardianship for Jeff in court, the fees would start to approach five thousand dollars. Their initial savings going with Wills would be lost. In addition upon Jeff's death Ellen would have to conduct a probate which would cost another five to ten thousand dollars.

The main hurdle to the living trust is the initial cost in attorney fees which is why Jeff and Ellen decided to go with the lower priced Will and statutory power of attorney. This has changed now with the information explosion on the internet and the do it yourself legal products available.

Even though I make my living from drafting trusts for clients, I suggest people consider drafting their own living trusts instead of a will and statutory power of attorney. If your total estate value is less than the federal estate tax threshold of $3.5 million and any lower threshold imposed by your state you should consider drafting it yourself. If you properly fund the trust you will avoid a costly guardianship proceeding similar to what Jeff and Ellen were facing. We suggest you look for a book or course that not only teaches you about the trust and its process but gives you samples on what your trust and all the supporting documents should look like.