What happens if you’re in an accident and can’t communicate? Or if you suffer a brain injury and need funds transferred to pay your mortgage? You may be wishing you’d executed a Durable Power of Attorney (POA). A Durable POA allows you to appoint someone as an “agent” to step in and handle your finances if you become physically or mentally incapacitated. This trusted person can handle certain legal and financial duties for you such as paying bills and managing your benefits, insurance and investments.
There are two primary types of Durable POAs. One springs into effect when you are deemed incapacitated, often called a “springing” POA. Typically, a licensed doctor must determine when this agent can act on your behalf. The other type takes effect as soon as the document is signed and is referred to as a “standing” POA. Both remain effective through incapacitation, hence the “Durable” nature.
You can limit your agent’s powers to certain financial duties or provide them with the flexibility to make broad financial decisions, such as buying or selling property. You can also set forth provisions about how to handle distributions from your investments or require a second signature on certain checks. There are certain powers that you must explicitly state in your power of attorney, such as giving your agent the ability to change beneficiary designations, change a trust, or make gifts. When creating these powers, you should seek the expertise of an attorney who specializes in estate law to draft your Durable POA and select an agent who you believe would handle your financial concerns properly. It is recommended that you also name successor agents in the event the primary agent is no longer willing or able to perform the duties.
The person you name as your agent is held to a “fiduciary” standard, meaning the agent must follow your instructions as set forth in your durable power of attorney and must act in your best interests. The agent can be held liable if he or she does not act in your best interests.
A Durable POA can be amended or revoked at any time, as long as you are deemed competent and of sound mind. Otherwise, it remains in force until you die, at which time the agent is no longer able to make decisions. Be sure to review your agents and successor agents periodically, especially following any major life events – including divorce or death of a spouse. These events may prompt you to revoke the document and execute a replacement.
Executing a Durable POA can save your loved ones the trouble of having to petition the court to designate an agent to act on your behalf, which involves court costs, time delays, and public hearings. A Durable POA can allow another individual to step in during a time of crisis, and ensure your affairs are addresses in a timely manner. We recommend you incorporate this important document into your estate plan!