Durable Power of Attorney: Key Estate Planning Document

For most people, the durable power of attorney is the most important estate planning document available — even more useful than a will. A power of attorney allows a person you appoint — your “attorney-in-fact” or “agent” — to act in your place for financial purposes, when and if you ever become incapacitated.

In that case, the person you choose will be able to step in and take care of your financial affairs.

What If I Don't Have a Durable Power of Attorney?

Without a durable power of attorney, no one can represent you unless a court appoints a conservator or guardian. That court process takes time, costs money, and the judge may not choose the person you would prefer. In addition, under a guardianship or conservatorship, your representative may have to seek court permission to take planning steps that they could implement immediately under a simple durable power of attorney.

A power of attorney (POA) may be limited or general. A limited POA may give someone the right to sign a deed to property on a day when you are out of town. Or it may allow someone to sign checks for you. A general power is comprehensive and gives your attorney-in-fact all the powers and rights that you have yourself.

A POA may also be either current or "springing." Most powers of attorney take effect immediately upon their execution, even if the understanding is that they will not be used until and unless the grantor becomes incapacitated. However, the document can also be written so that it does not become effective until such incapacity occurs. In such cases, it is very important that the standard for determining incapacity and triggering the POA be clearly laid out in the document.

Do Banks Accept Durable Power of Attorney?

Attorneys report that their clients are experiencing increasing difficulty in getting banks or other financial institutions to recognize the authority of an agent under a durable POA.

A certain amount of caution on the part of financial institutions is understandable. When someone steps forward claiming to represent the account holder, the financial institution wants to verify that the attorney-in-fact indeed has the authority to act for the principal.

Still, some institutions go overboard, for example requiring that the attorney-in-fact indemnify them against any loss. Many banks or other financial institutions have their own standard power of attorney forms.

To avoid problems, you may want to execute such forms offered by the institutions with which you have accounts. In addition, many attorneys counsel their clients to create living trusts in part to avoid this sort of problem with powers of attorney.

Other Considerations

While you should seriously consider executing a durable POA, you may not have someone you trust to appoint. It may be better to have the probate court look over the shoulder of the person handling your affairs through a guardianship or conservatorship. In that case, you may execute a limited durable POA simply nominating the person you want to serve as your conservator or guardian. Most states require the court to respect your nomination "except for good cause or disqualification."

The federal Consumer Financial Protection Bureau has a booklet titled "Managing Someone Else's Money: Help for agents under a power of attorney." Download it in PDF format. 

Learn more about the main types of power of attorney.

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