Durable powers of attorney, which appoint someone as your agent and grant them authority to transact business on your behalf, are a commonly-used estate planning device. They can be used to appoint an agent to handle your affairs if you are disabled, thus saving the expense and complexity of a guardianship. Even if you are not disabled, having a trusted individual available who has formal authority to act for you can make it easier to conduct your affairs.
The key phrase there is "trusted individual." While your agent under a power of attorney has the same basic fiduciary duty to you as a guardian or trustee, the agent is not subject to the active supervision of a court like a guardian would be. A recent article in the Wall Street Journal discussed some of the problems that can arise if your agent decides to work for his own benefit instead of yours. Because there's no active supervision, and fewer formalities than with a trust, it can be difficult to detect when an agent is misusing his powers, and the problem is often not discovered until a lot of damage has been done. I've been involved in litigation over the misuse of powers of attorney on several occasions, and I've seen it first-hand.
Does that mean you shouldn't use a durable power of attorney? I wouldn't say that, but you do need to think about who you select as your agent and what authority you give that agent. The terms of the power of attorney can restrict the agent's authority to certain transactions or certain types of activity, or even condition the existence of that authority on certain events. I have also had clients escrow their powers of attorney with me, to be released to the agent only at the client's direction, or in the event the client becomes disabled.
These are all matters you should discuss with your estate planning advisor.
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