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Durable Power of Attorney

Durable Power of Attorney Explained

A lot of people do not consider formulating a power of attorney when planning for retirement. Think about it, though. What if  an accident or an illness incapacitated you? Or you get worn out by aging? What if, in your most vulnerable moments, you are unable to instruct medical professionals about the healthcare you want.  Who would you want to  manage your finances?

When managing day to day affairs, the grim realities of life often escape us. However, everyone will at some point face this eventuality – some sooner than later.

A power of attorney won’t keep accidents at bay or keep you from getting older. It will, however, make legal proceedings easier for your loved ones and you when the going gets tough.

What is a Durable Power of Attorney?

Simply put, a power of attorney empowers another person of your choosing to make decisions on your behalf.

If you become incapacitated, you’ll need a ‘durable’ power of attorney to direct your finances and medical care. The term ‘durable’ indicates that the power of attorney stays applicable even if you become mentally incompetent.

By contrast, an ordinary or ‘non-durable’ power of attorney ends if the person granting it becomes incapacitated.

With a durable power of attorney, the individual you name will be legally allowed to sign and make decisions on your behalf. Examples include paying the bills, handling your finances, and even instructing how you should receive medical care – if you are not able to do it yourself.

Think of it this way, if something happens to you and you don’t have durable powers of attorney, your family may be forced to seek legal help to get the authority to manage your affairs. This can cost them time, money, and mental stress – issues that could have been avoided with a durable power of attorney.

Types of Durable Power of Attorney

Your agent can make decisions according to the powers you granted to them. A limited power of attorney can specify certain powers to the agent – such as the authority to sign documents or make decisions within a certain limit. For example, a medical power of attorney only applies to healthcare issues and excludes any decisions that fall outside the scope of healthcare.

If it’s a general power of attorney, then your agent will have a broad set of powers. You can still define certain parameters, but they will retain more flexibility. A general power of attorney does not extend to medical care. You’ll need a medical power of attorney for that.

The two main types of power of attorney you can create are:

i) Financial Power of Attorney

Most financial powers of attorney are relatively simple and used for single transactions, such as paying the bills. But a durable power of attorney is more comprehensive. It empowers your trusted agent with extensive authorities to dictate your finances in accordance with your wishes.

This person can handle relatively mundane tasks such as paying the bill and checking mail. Your agent can also be in charge of your funds if you become incapacitated.

ii) Medical Power of Attorney

This legal document gives your agent the right to make medical decisions on your behalf. It is different than a ‘general power of attorney’. Depending on your state, this person may be referred to as your ‘agent’, ‘attorney in fact’, ‘health care surrogate’ ‘health care proxy’, and similar terms.

Your ‘health care proxy’ will work with medical professionals to get you the kind of care that aligns with your goals.  As per the law, your agent must also do as instructed by the power of attorney.

How Can I Tell if My Power of Attorney is a Durable Power of Attorney?

We strongly recommend seeking legal counsel to answer this question with accuracy. However, if you have a durable power of attorney, it will have a clause that essentially says that the document will remain in effect even in case of disability, whether it’s physical or mental.

If your power of attorney contains a clause like this, then it is most likely a durable power of attorney and will stay in effect even if you become incapacitated.

The exact specifics of language and requirements vary from state to state.

Can I Write a Power of Attorney Myself?

The requirements for the power of attorney vary from state to state. It’s best to retain an attorney and have them draft a durable power of attorney. Some states require the inclusion of very precise legal language. They also have requirements for witnesses. You may also be required to get the document notarized – but this also varies from one state to another.

Who Are the Best Candidates as My Agent?

For obvious reasons, you should only choose someone you know well. Someone you trust will follow your instructions and the law.  They will make decisions to benefit you instead of enriching themselves. You can divide the power of attorney among different individuals. Have your brother act make financial decisions and your sister make medical decisions, for example.

It’s perfectly normal to experiment with different people as agents and see if that arrangement works out or not. You don’t need any explaining to do for your decisions – simply revoke the durable power of attorney and create a new one.

However, choose wisely. For example, an agent can access your financial accounts, funds, and use them for your own benefit. A fiduciary duty obligates them to manage your assets as directed in the document. You are well within your right to sue the agent for misusing your funds. With that said, if the agent spent your money and has no assets of their own, then you may not be able to recover your finances.

Name an Alternate Agent

If your named agent dies before you or becomes mentally incompetent, you will want to have a backup agent who can act on your behalf.  And while you’re at it, consider nominating a conservator and guardian in your power of attorney. They may be needed in the future.

Is the Durable Power of Attorney Valid in Other States?

At least 26 states have adopted the United Power of Attorney Act (UPOAA), more details here. These states generally have the same requirements for a power of attorney. Moreover, a power of attorney in one state can be accepted in another state.

States that haven’t adopted UPOAA may not recognize a power of attorney deemed valid from that other state.   However, some states may not recognize a power of attorney. This usually happens if you don’t meet specific legal and notarization requirements defined by the state.

For this reason, you should consider creating a new one according to the state’s requirements if you plan on moving or have an agent in another state.

Caution: Always Read the Document!

Whether you decide to create two durable powers of attorney or just one, make sure to review the powers listed in the legal document. For instance, do you want the person to have the authority to revoke a living trust that you created during your lifetime? Probably not. This is why you should discuss these types of matters with your attorney.

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