How does a durable power of attorney work?

How does a durable power of attorney work?

When you create and sign a power of attorney, you give another person legal authority to act on your behalf. This person is called your "attorney-in-fact" or, sometimes, your "agent." The word "attorney" here means anyone authorized to act on another's behalf; it's most definitely not restricted to lawyers.

A "durable" power of attorney stays valid even if you become unable to handle your own affairs (incapacitated). If you don't specify that you want your power of attorney to be durable, it will automatically end if you later become incapacitated.

When does a durable power of attorney take effect?

A durable power of attorney can be drafted so that it goes into effect as soon as you sign it. But, you can also specify that the durable power of attorney does not go into effect unless a doctor certifies that you have become incapacitated. This is called a "springing" durable power of attorney. It allows you to keep control over your affairs unless and until you become incapacitated, when it springs into effect.

What does an attorney-in-fact do?

Commonly, people give an attorney-in-fact broad power over their finances. But you can give your attorney-in-fact as much or as little power as you wish. You may want to give your attorney-in-fact authority to do some or all of the following:

• use your assets to pay your everyday expenses and those of your family
• buy, sell, maintain, pay taxes on and mortgage real estate and other property
• collect benefits from Social Security, Medicare or other government programs or civil or military service
• invest your money in stocks, bonds and mutual funds
• handle transactions with banks and other financial institutions
• buy and sell insurance policies and annuities for you
• file and pay your taxes
• operate your small business
• claim property you inherit or are otherwise entitled to
• hire someone to represent you in court, and
• manage your retirement accounts.

Whatever powers you give the attorney-in-fact, the attorney-in-fact must act in your best interests, keep accurate records, keep your property separate from his or hers and avoid conflicts of interest.

I have a living trust. Do I still need a durable power of attorney for finances?

A revocable living trust can be useful if you become incapable of taking care of your financial affairs. That's because the person who will distribute trust property after your death (the successor trustee) can also, in most cases, take over management of the trust property if you become incapacitated.

Few people, however, transfer all their property to a living trust, and the successor trustee has no authority over property that the trust doesn't own. So a living trust isn't a complete substitute for a durable power of attorney for finances.

Copyright © 2002 Nolo

DISCLAIMER: This site and any information contained herein are intended for informational purposes only and should not be construed as legal advice. Seek competent legal counsel for advice on any legal matter.

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