What is a Power of Attorney?
A power of attorney (POA) allows you the freedom to declare a person or organization to manage your financial or medical affairs in the event that you can no longer do so.
A "General" Power of Attorney gives the agent, or Attorney-in-Fact, very broad powers to do almost every legal act that the Principal can do. These acts include things like handling business transactions, settling claims, employing professional help, buying life insurance, and making other financial decisions.
The power of attorney goes into effect as soon as you sign it, unless you state otherwise.
A Durable Power of Attorney is one step further than a power of attorney. A power of attorney states who can make decisions in your place if (or when) you’re unable. A Durable Power of Attorney is someone you appoint to be the medical and financial decision-maker if you ever become mentally incapacitated.
For example, if you have a stroke and could no longer speak or think clearly, a durable power of attorney saves you a lot of stress from the court system. Without this document, you would have to file paperwork with the court, be appointed a temporary guardian (most likely a stranger), and then have to explain yourself in court (possible being declared incompetent).
The rights of your durable power of attorney include things like:
- Spend, invest, or borrow money
- Pay bills
- File tax returns
- Make bank transactions
- Sign contracts, notes, or assignments
- Buy or sell real estate
- Access safety deposit boxes
- Vote with shares of stock
- Execute leases
- Make charitable gifts
- Create and fund or modify trusts
- Buy and/or modify life insurance policy
- Appoint a guardian
- Make hiring decisions
- Request and review medical records
- Authorize medical care for principal
- Revoke, withdraw or modify consent for medical care
- Arrange for care facility
The purpose of a durable POA is to plan for medical emergencies, cognitive decline later in life, or other situations where you're no longer capable of making decisions. This will prevent you from having to be declared incompetent in court if something were to happen to you.
When choosing a durable power of attorney, you want to elect someone who will respect your wishes. It’s important that they are organized enough to keep records of transactions on your behalf and respectful enough to keep you, or a third party, informed.
A common misconception is that you cannot have more than one power of attorney. In fact, you can appoint multiple agents, however they must act in unison. If you choose only one agent to make a decision, have a successor agent as backup in case the first agent is unable to serve.
The only thing that distinguishes a Durable Power of Attorney from a regular Power of Attorney is special wording that states that the power survives the Principal's incapacity.
A power of attorney is designated for specific transactions and can be revoked at any time. A durable power of attorney is designated to continue if or when the Principle becomes incapacitated. The only time a durable power of attorney can be revoked is by the Principle if they are still in their right mind to do so, or by a third party if they have sufficient evidence of abuse of power.
Neither power of attorney (non-durable) nor durable power of attorney continues after the death of the Principal.
If you want to know if your power of attorney is a durable power of attorney, it’s best to seek legal consultation. However, you can also look at your documents to see if the clause states that the power of attorney will remain in effect in the event of disability or incapacitation.
Remember, not all power of attorney’s are created equal. There are different types of POA’s, and each type gives the agent a different level of control. Take time to look through these documents and have an experienced lawyer by your side to help sort out the details.