A durable power of attorney, sometimes referred to as a “financial power of attorney,” is when a principal gives authority to an agent to handle their affairs including their financial affairs.
Powers of attorney are not just for the elderly, although they can be essential for end-of-life planning. And there are different types of powers of attorney that can be tailored to meet the unique needs of a person’s unique situation.
In this article, we will discuss durable powers of attorney that allow an agent to handle a principal’s financial affairs as needed before or after a person becomes incapacitated, including:
- What “durable” power of attorney means in SC,
- How you get a durable power of attorney,
- How you can use a durable power of attorney, and
- SC laws that govern the use of a durable power of attorney.
What is a Durable Power of Attorney in SC?
There are four basic types of powers of attorney, and each can be tailored to meet your specific needs. They include:
- Limited power of attorney,
- Durable power of attorney,
- Springing power of attorney, and
- Healthcare power of attorney.
A “limited,” or “general” power of attorney enables the agent to act on behalf of the principal for the purposes specified in the document – it could limit the power of attorney to a single transaction, or it could provide broad authority to handle all of a person’s affairs.
The general rule is that a limited power of attorney is only effective to the extent that the principal could have acted on their own behalf, which means that it does not survive a person’s incompetency.
Under SC law, however (see SC Code § 62-8-104), a power of attorney that meets the statutory requirements automatically becomes a “durable” power of attorney that survives the principal’s incapacitation unless the document specifies that it terminates upon the incapacitation of the principal.
A healthcare power of attorney, often executed at the same time as the durable power of attorney, allows the agent to make critical healthcare decisions on behalf of the principal should they become incapacitated.
Powers of attorney can become effective immediately, or they can become effective upon a triggering event like the principals’ incapacitation (a “springing” power of attorney).
The DPOA is called “durable” because it survives incapacitation allowing the agent to use the power of attorney when the principal needs it most.
In any case, a power of attorney must be executed by the principal while they are of sound mind. This means that it is important that you plan ahead and grant the appropriate powers of attorney to someone you trust before you become incapacitated.
What Does a Durable Power of Attorney (POA) Allow You to Do?
A durable power of attorney allows the agent to conduct business on behalf of the principal and handle the financial affairs of the principal, with limits that are specified in the document.
People commonly use POAs to:
- Pay bills,
- Manage bank accounts,
- Buy or sell property,
- Enter into contracts or agreements for services,
- Provide or obtain childcare services, or
- Engage in healthcare planning on behalf of the principal.
Note that an agent who holds a POA is a fiduciary – they owe a duty of trust to the principal to make decisions and take actions using the POA solely for the benefit of the principal.
Is a Durable POA Still Effective if the Principal Becomes Incapacitated?
Unless the POA specifies that it terminates upon the principal’s incapacitation, a “limited” POA is automatically treated as a “durable” POA under SC law. This is one of the primary uses of a DPOA – to ensure that a family member or trusted individual is prepared to handle the principal’s affairs upon their incapacitation.
What are the Rules for a Durable Power of Attorney in SC?
Below, we will cover a few of the rules for using a durable power of attorney (DPOA) in South Carolina.
- The extent of the agent’s authority is limited to the actions that are granted by the document itself, although most DPOAs should grant broad authority to handle the principal’s finances and affairs, and
- The agent’s actions are limited by the fiduciary relationship created by the POA.
What Happens if the Agent Takes Property for Their Own Benefit?
If the agent does not act in the principal’s best interest or if they “embezzle” funds or property, then:
- The POA can be revoked by the principal or by the probate court if the principal is incapacitated,
- Funds or property can be recovered through the courts, or
- The agent could be charged with breach of trust if they converted the principal’s property to their own use with fraudulent intent.
Does the DPOA Need to be Filed/ Recorded?
A durable power of attorney is effective upon execution, and the agent can begin to use it immediately if needed. It must be recorded with the clerk for the county in which the principal lives, however, to remain effective after the principal’s incapacitation.
In most cases, the best practice is to record the POA soon after it is executed.
Can You Revoke a Power of Attorney?
The principal can revoke a durable power of attorney at any time if the principal is competent, or the agent can resign at any time. Once the principal becomes incapacitated, the probate court can remove the agent if necessary.
Can the Agent Execute a Will on Behalf of the Principal?
An agent cannot execute a will using the power of attorney, but the agent might be authorized to make gifts on behalf of the principal if this is covered in the document.
In some cases, including language that permits the agent to make gifts (subject to instructions and limits contained in the POA document) makes sense for estate planning purposes (to avoid paying unnecessary taxes or to avoid probate).
What if the Agent Becomes Unavailable?
You can choose any person that you trust with your finances, personal property, and business affairs as your agent.
You should also identify a successor agent in your POA who can take over managing your affairs should the original agent become incapacitated or unavailable to act as your agent.
Does an Agent Under a Power of Attorney Get Paid for Their Time?
The agent is entitled to 1) reimbursement for all expenses paid on behalf of the principal, and 2) reasonable compensation for their time and services.
The POA document can specify, however, whether compensation will be paid, and, if compensation is paid, what is considered “reasonable.”
Questions About Durable Powers of Attorney in SC?
If you have questions about durable powers of attorney in SC or need help drafting and executing any type of POA, call a Myrtle Beach Probate and Estate Planning Attorney at Coastal Law now at (843) 488-5000 or send us a message online to find out how we can help.