What is a Durable Power of Attorney?

The most popular trust package I prepare for clients is a living trust package. The living trust package includes several documents, one of which is a durable power of attorney. Many people have heard the terms “last will” or “living trust”, but not everyone is familiar with a durable power of attorney and why it is necessary to have one. 

A durable power of attorney allows your property and financial affairs to be managed the way you want in the event you become incapacitated. Unless you have a properly drafted power of attorney, when you become incapacitated, it likely will be necessary to go to court and have a guardian or conservator appointed for you.  This conservatorship process is usually lengthy and emotionally draining – not to mention that the person chosen to be your conservator may not be the person you want. 

Types of Durable Powers of Attorney

There are two types of durable powers of attorney: an “immediate” durable power of attorney and a “springing” durable power of attorney.  With an immediate durable power of attorney, the person you appoint has the immediate power to act. There does not need to be a doctor’s determination of incapacity in order for that person to deal directly with your banks or other financial institutions. With a springing power of attorney, only upon a doctor’s determination of incapacitated will the person you appoint have the authority to deal directly with your banks and other financial institutions.

Important Questions About A Durable Power of Attorney

Here are answers to a few important questions about a durable power of attorney:

What does a “durable” power of attorney mean?
When you sign your trust documents, you will also sign your durable power of attorney. This official signing gives the document the power to become “durable,” meaning that it will continue in effect after you become incapacitated. Your durable power of attorney will terminate at your death or at any time you specify in the document. So long as you are competent, you may revoke it. You can always limit the authority of the agent in the document, giving them as many or as few powers over your financial affairs as you wish. This is one of the main advantages of a durable power of attorney: its flexibility.

Who can establish a Durable Power of Attorney?
Any adult who is legally competent can establish a power of attorney.  Every person of legal age and competency should have one. Who may act as your agent under a Durable Power of Attorney? When you appoint another individual to make financial decisions on your behalf, that individual is called your “attorney-in-fact” or “agent”.  Most people choose their spouse, domestic partner or adult child as their agent, but a trusted family member, friend or professional colleague may also be a good choice.  The person you chose should be someone who is capable of handling your financial affairs and someone you trust.  You may also appoint more than one agent to serve either simultaneously or separately.  However, appointing more than one agent to serve simultaneously can be problematic because if any of them is unavailable, important financial action may be delayed.  Confusion and disagreement between co-agents can also be another cause of problems.  It is better to appoint one individual as the primary agent and appoint additional individuals to serve as alternate agent if your first choice is unwilling or unable to serve.

It is important to create a durable power of attorney to assure your wishes regarding your financial affairs are carried out exactly as you want, and it allows you to decide who will be making financial decisions for you if you cannot make them yourself.