QUESTIONS?
What Is a Durable Power of Attorney
Our team is here to answer your questions and help you protect your legacy. If you’d like guidance tailored to your situation, schedule a time to talk with us.
Get StartedWhat Is a Durable Power of Attorney?
A durable power of attorney is a legal document that lets someone else handle your affairs if you can't do it yourself. Think of it as giving someone you trust the keys to your financial and legal life when you're unable to manage things on your own.
The person you choose is called your "agent" or "attorney-in-fact." They can pay your bills, manage your bank accounts, handle real estate transactions, and make other important decisions on your behalf. The "durable" part is what makes this document so important - it stays valid even if you become mentally incapacitated.
Regular vs. Durable Power of Attorney
Here's where things get interesting. There are two main types of power of attorney, and the difference is crucial:
Regular Power of Attorney: This becomes invalid the moment you become incapacitated. So if you have a stroke or develop dementia, this document becomes useless right when you need it most. It's like having an umbrella that dissolves in the rain.
Durable Power of Attorney: This continues working even after you become incapacitated. It's specifically designed to kick in when you need help the most. The document includes special language that makes it "durable" - meaning it survives your incapacity and continues to provide legal authority to your designated agent.
Most people want the durable version. After all, if you're mentally sharp and can handle your own affairs, you probably don't need someone else doing it for you.
When Does It Take Effect?
You have two options for when your durable power of attorney becomes active:
Immediate: Your agent can start using their powers right away, even while you're perfectly capable. This requires a lot of trust, but it can be helpful if you travel frequently or want someone to handle certain tasks for you. Some people prefer this approach because it avoids potential delays and complications when urgent decisions need to be made.
Springing: The powers only "spring" into action when you become incapacitated. A doctor usually needs to certify that you can't handle your own affairs. This gives you more control but can create delays when your agent needs to act quickly. Banks and financial institutions may also require additional documentation to verify the incapacity has occurred, which can slow down important transactions.
What Powers Can You Grant?
You get to decide exactly what your agent can and cannot do. Common powers include:
- Managing bank accounts and investments
- Paying bills and taxes
- Buying, selling, or managing real estate
- Running a business
- Making insurance decisions
- Handling government benefits
- Making legal decisions and hiring attorneys
- Accessing digital accounts and managing online assets
- Making gifts to family members or charities (if specifically authorized)
You can give broad powers or be very specific about what your agent is authorized to do. Some people grant limited powers for specific situations, like managing one particular investment account, while others provide comprehensive authority over all financial and legal matters.
Choosing Your Agent
This is probably the most important decision you'll make when creating a durable power of attorney. Your agent should be someone who:
- You trust completely with your money and decisions
- Is responsible and organized with their own financial affairs
- Understands your values and wishes
- Lives close enough to handle your affairs effectively
- Is younger than you and likely to outlive you
- Gets along reasonably well with your family members
- Has the time and ability to handle potentially complex financial matters
Many people choose their spouse, adult children, or trusted friends. It's smart to name a backup agent too, in case your first choice can't serve. Some individuals even appoint co-agents who must act together, providing additional oversight and protection against potential abuse.
Durable Power of Attorney vs. Guardianship
Without a durable power of attorney, your family might need to go to court to get guardianship or conservatorship if you become incapacitated. This process is expensive, time-consuming, and public record. The court decides who will manage your affairs, and it might not be the person you would have chosen.
A judge will also impose ongoing supervision and reporting requirements on the appointed guardian. Your chosen guardian has to regularly report to the court about your condition and finances, and may need court approval for major decisions. It's much more complicated, restrictive, and costly than having a durable power of attorney in place.
The guardianship process can take weeks or months to complete, leaving your family unable to access accounts or make necessary decisions during a critical time when bills need to be paid and financial obligations must be met.
Limitations and Safeguards
A durable power of attorney isn't a blank check for your agent. Your agent has a fiduciary duty to act in your best interests, not their own. They must keep good records and can be held legally responsible if they misuse their powers or engage in self-dealing.
There are also things your agent typically cannot do, like change your will, get married on your behalf, vote in elections, or make medical decisions (unless you specifically include healthcare powers in the document).
You can revoke the document at any time while you're mentally competent simply by creating a new power of attorney or formally revoking the existing one. You can also build in specific limitations, such as requiring your agent to get approval from another family member for large transactions, or requirements like annual accountings to beneficiaries.
Financial Institution Acceptance
One practical consideration is that banks and other financial institutions can sometimes be hesitant to accept older power of attorney documents. They may have concerns about whether the document is still valid or worry about potential liability. Some institutions have their own power of attorney forms they prefer customers to use.
To avoid problems, consider updating your durable power of attorney every few years, and notify your banks and financial institutions when you create or update the document. Some people even execute the institution's preferred forms in addition to their comprehensive durable power of attorney.
Why You Need One
Nobody plans to become incapacitated, but it happens more frequently than most people realize. Strokes, accidents, dementia, and serious illnesses can strike anyone at any age. Without a durable power of attorney, your family faces a legal nightmare at an already difficult and emotionally challenging time.
Banks won't let your spouse access your individual accounts without proper legal authority. Nobody can pay your bills or manage your investments, potentially leading to missed payments, investment losses, and financial chaos. Your family will need to hire lawyers and go to court just to help you manage basic financial tasks. It's stressful, expensive, and completely avoidable with proper planning.
Getting Started
Creating a durable power of attorney involves careful consideration of your specific needs, family dynamics, and financial circumstances. The document must meet your state's legal requirements to be valid, including proper execution, witnessing, and notarization. Each state has different rules about these formalities, and some states have specific statutory forms.
Consider consulting with an estate planning attorney to ensure your durable power of attorney is properly prepared and coordinated with your other estate planning documents like your will and trust. An experienced attorney can also help you understand the tax implications of certain powers and ensure the document provides the right balance of authority and protection for your specific situation.
It's a small investment that can save your family tremendous hassle, expense, and emotional stress down the road while ensuring your financial affairs are managed according to your wishes and values.
