First, it can be effective immediately upon execution.
Or, second, it can be made effective upon incapacity of the principal.
If it is effective immediately, then the agents named in the durable power of attorney can act under any of the powers in the document without further authorization. It can be useful if the principal (the person who created the power of attorney in the first place) is traveling or is just not available to sign a document or otherwise manage their affairs. In this case, if you name your spouse as your agent, then they can sign documents for you to transfer your home, open a bank account, handle an insurance claim or whatever powers are specifically authorized in the document without any further delay. This can be a good thing.
And if it is effective upon incapacity, then the agent must follow the guidelines in the power of attorney for acting when the principal becomes incapacitated. This may mean obtaining certification of incapacity from two medical doctors or from a court order that the principal is incapacitated and unable to manage their affairs. This may create a significant hurdle for the agent to act under the power of attorney. It make take time to find two doctors willing to sign such a certification of incapacity or for the court to make such a finding.
What happens if your power of attorney also lists alternate agents in case your spouse cannot serve as your agent? In a typical scenario, a married couple will name each other as agents and then name their adult son and favorite niece to act as back up agents. If this power of attorney is effective immediately, it may be possible for the adult son or favorite niece to act on behalf of the principal immediately. Something wrong could happen. There could be some abuse of power. While the agent is not allowed to act contrary to the best interest of the principal, the abuse of power does happen. And it happens often. We handle litigation over such matters with regularity that it is alarming.
So, this is why when we draft our powers of attorney, we advise our clients to have theirs effective upon their incapacity. In the alternative, if you are traveling or will be overseas for sometime or even need someone to act on your behalf for another matter, you can execute a limited power of attorney for very specific powers to be effective for a time period or put other conditions regarding its use.
This is a very timely post as on an email discussion list among attorneys across the country, most attorneys draft powers of attorneys for their clients to be effective immediately. Their collective thought process was that you need to trust your agents. We disagree. You can still trust your agents, but there is nothing wrong with having checks and balances in place. Making it effective upon your incapacity is often a wise decision.
That being said, we do draft powers of attorneys to be effective immediately where the clients wish for that. In those cases, clients are advised of the concerns we have and ultimately whatever they decide is what we draft.