A durable power of attorney is a legal document through which you—the principal—can name someone to make decisions on your behalf should you not be able to do so.
In other words, a durable power of attorney can give you the peace of mind that if something should happen to you, making you unable to make important choices for yourself that affect you, your family, and/or your finances, then you—not a court—would choose who would make those important choices. Without a power of attorney in place, you would likely need to appoint a guardian by way of the court, which could end up costing you time and court fees.
For more details about what a durable power of attorney entails, read on.
What Powers Does a Durable Power of Attorney Have?
The extent of the powers of your attorney-in-fact or agent (to whom you assign the power of attorney) is entirely up to you. Two main provisions within a durable power of attorney include the authority to act following a certain event, such as hospitalization, disability or incapacitation, and powers of agent. Some of the powers you may consider granting to your appointed attorney-in-fact include the following:
- Conducting business and banking transactions
- Borrowing money
- Buying, selling and managing real estate
- Paying for health care
- Handling legal or insurance claims
- Filing tax returns
- Making donations or gifts
When Does a Durable Power of Attorney Take Effect?
A durable power of attorney could be designed to take effect if you become mentally incapacitated or even if you plan on leaving the country for a certain period of time. Alternately, you could choose to have the durable power of attorney take effect immediately.
Although state law varies, generally, a valid durable power of attorney requires that the proposed attorney-in-fact be of sound mind and acting of his or her own volition. Moreover, there often must be one or more adults present to witness the signing of the document, although in some states, notarization of the document may be required.
Because there may be other state-specific provisions regarding the establishment of a durable power of attorney, be sure to check local laws to make sure your document is executed correctly.
How Long Does a Durable Power of Attorney Remain Effective?
Unlike a regular power of attorney, which ceases to be effective once the principal is incapacitated, a durable power of attorney remains in effect until the principal revokes the powers or if he or she dies. There are other ways in which a durable power of attorney can be terminated:
- A court deems your document invalid
- A court revokes your appointed agent's authority
- When you divorce (if your spouse was the agent)
Some Words About a Limited Power of Attorney
A limited power of attorney functions much like a durable power of attorney, except that it is generally put to use when a specific event is anticipated, such as when the principal has planned for surgery or travel. It gives authority to an agent to perform a specific an act, such as open a bank account or sell your car. Once that act has been performed, the limited power of attorney is no longer valid.
Overall, a durable power of attorney assures you that you have chosen the person who will be in charge of your affairs should you become incapacitated or even if you're simply ready to turn over control of your affairs at a different given point in time—and that kind of peace of mind can be priceless.
Everyone needs a plan, whether you're married or single, with many assets or very few. Find out what you can do to prepare for whatever lies ahead with a last will, living trust, living will, power of attorney or pet protection agreement. Learn more