Of all the estate planning documents we prepare, the durable power of attorney may be the one that saves your family the most stress and expense — even though it only comes into play if you become incapacitated.
What Is a Power of Attorney?
A power of attorney (POA) is a legal document that grants another person (your "agent" or "attorney-in-fact") the authority to act on your behalf in legal and financial matters. A *durable* power of attorney remains in effect even if you become mentally incapacitated — which is exactly when you need it most.
What Can an Agent Do?
The scope of authority you grant your agent can be broad or narrow, depending on what you want. A general durable POA typically authorizes the agent to:
- Manage bank accounts and investments
- Pay bills and file taxes
- Buy or sell real estate
- Enter into contracts
- Manage business interests
- Make gifts on your behalf
What Can't an Agent Do?
- Make healthcare decisions (that requires a medical POA)
- Change your will
- Act after your death (the POA terminates at death)
- Vote on your behalf
Springing vs. Immediate POA
A "springing" power of attorney only takes effect when you become incapacitated — typically defined by a physician's certification. An "immediate" POA takes effect as soon as you sign it.
For most clients, we recommend an immediate durable POA, because a springing POA can create practical delays (obtaining the required physician certifications) exactly when your family needs to act quickly.
Choosing Your Agent
This is the most important decision in the process. Your agent should be:
- Someone you trust implicitly with financial decisions
- Organized and capable of handling paperwork
- Willing to act in your interest, not their own
- Ideally, geographically accessible when needed
Many clients name a spouse as primary agent and an adult child as alternate. Others name a sibling or trusted friend.
The Risk of a Broad POA
A general durable POA is a powerful document. In the wrong hands, it can be used to drain accounts or make unauthorized transfers. Choose your agent carefully, and consider whether you want to include specific limitations or require co-agents for major transactions.
When You Can't Get a POA
If you become incapacitated without a POA in place, your family cannot manage your finances without going to court to obtain a guardianship or conservatorship. This process can take months, cost thousands of dollars, and require ongoing court supervision. It's entirely avoidable.
*This article is for general educational purposes only. Please consult an attorney regarding your specific situation.*
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