Imagine a man is hospitalized unexpectedly, and his wife needs to manage a brokerage account titled solely in his name. Without legal authorization, the financial institution may refuse to let her manage the account or make decisions on his behalf. This kind of problem is often preventable.
A durable power of attorney is one of the most useful documents you can have in a Kentucky estate plan. It's also one of the easiest to put off—until the moment it's too late. Our Radcliff attorneys can help you get it done now, while the choice is still yours to make.
What Is a Durable Power of Attorney in Kentucky?
A power of attorney is a legal document that gives another person, called your agent or attorney-in-fact, the legal authority to act on your behalf.
Under Kentucky's Uniform Power of Attorney Act (KRS Chapter 457), a power of attorney created under this chapter is durable by default. That means it remains effective even if you later become incapacitated, unless the document expressly states that it terminates upon incapacity.
You don't have to do anything special to make a power of attorney durable under Kentucky law. It already is, unless you say otherwise. What you would need to do is include specific language if you want the authority to end upon incapacity, which is rarely the goal in estate planning.
Durable vs. General Power of Attorney: Which One Do You Need?
For most estate planning purposes, a durable power of attorney is the right choice because it continues to operate if you become incapacitated, which is precisely when you're most likely to need it. A general power of attorney that terminates on incapacity is better suited to specific, time-limited transactions, such as authorizing someone to close a real estate deal on your behalf while you're traveling.
Under current Kentucky law, both types carry the same execution requirements, and durability is already the default. The practical distinction is if you want the authority to end upon incapacity, your document must say so expressly. If you want it to continue, as most people do, no special language is required, though your lawyer should still draft the document carefully to reflect your actual intentions.
What Powers Can You Grant?
KRS Chapter 457 gives you flexibility in deciding what your agent can and cannot do. You can tailor the document to fit your situation. Common powers include:
- Managing bank accounts and investments
- Paying bills and managing debt
- Filing tax return
- Handling real estate transactions
- Operating a business
The powers you grant should reflect your actual circumstances. An agent managing a rental property needs different authority than one who only needs to pay routine bills. Healthcare decision-making is often handled through separate healthcare planning documents.
Choosing the Right Agent
The agent you name will have real authority over your financial life, so this is one of the most important decisions in the entire document.
Your agent doesn't have to be a family member, and it doesn't have to be the person you love most. It should be someone trustworthy, reliable, and capable of handling financial decisions under pressure. Ideally, it's someone who is reasonably local. You can also name a successor agent who can step in if your first choice is unable or unwilling to serve.
What Responsibilities Does Your Agent Have?
Naming someone as your agent doesn't give them free rein. They must act in accordance with your reasonable expectations if those are known, or otherwise in your best interest. They must act in good faith and within the scope of the authority you've granted.
Beyond those core duties, the statute also requires your agent to act with loyalty, avoid conflicts of interest that would impair their ability to act for you, exercise reasonable care and competence, keep records of transactions, and try to preserve your estate plan, where appropriate.
If an agent misuses their authority, like making decisions that benefit them at your expense, they can be held legally accountable. Choosing someone you trust is important, but it's equally important that they understand the weight of what they're agreeing to.
When Does a Durable Power of Attorney Take Effect?
A durable power of attorney is effective when it is executed unless the document itself provides that it becomes effective at a later date or upon a future event or contingency. If you sign it today, it's effective today, unless you've built in a delay or a trigger.
Some people prefer a "springing" power of attorney, which only activates upon incapacity.
Kentucky law permits springing powers of attorney, but the document must clearly define what incapacity means and how it is to be determined. If the document doesn't name a specific person to make that determination, KRS 457.090 allows it to be made in writing by a range of qualified individuals, including a physician, an advanced practice registered nurse, certain psychologists, qualified social workers, or an attorney or judge in some circumstances.
For many clients, an immediately effective durable power of attorney is simpler and more practical. Your lawyer can help you weigh the tradeoffs.
Execution Requirements: What Makes the Document Valid
A power of attorney must be signed by the principal or by another individual in the principal's conscious presence and at the principal's direction if the principal is physically unable to sign. Acknowledgment before a notary is the standard way to establish validity in practice and is usually necessary for third-party acceptance. Without it, the document loses the legal presumption that protects its validity.
You also have the right to revoke or change your power of attorney at any time, as long as you remain competent to do so. If your circumstances change, you can execute a new document or formally revoke the existing one.
How Our Central Kentucky Attorneys Can Help
Getting the details right matters. A document that's missing key language, improperly executed, or too vague to be useful can create more problems than it solves.
At Skeeters, Bennett, Wilson & Humphrey, our Radcliff attorneys help clients create durable powers of attorney that are clear, legally sound, and tailored to real-life needs. Whether you're putting together an estate plan for the first time or updating documents after a life change, we're here to help you get it done right. Contact us today to book an initial consultation.