A durable power of attorney for finances is a simple, inexpensive
and reliable way to arrange for someone to make your financial
decisions should you become unable to do so yourself. It's also a
wonderful thing to do for your family members. If you do become
incapacitated, the durable power of attorney will likely appear as a
minor miracle to those close to you.
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
- buy, sell, maintain, pay taxes on and mortgage real estate and
- 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
- 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.
How do I create a durable power of attorney for finances?
To create a legally valid durable power of attorney, all you need
to do is properly complete and sign a fill-in-the-blanks form that's
a few pages long. Some states have their own forms, but none of them
After you fill out the form, you must sign it in front of a
notary public. In some states, witnesses must watch you sign the
document. If your attorney-in-fact will have authority to deal with
your real estate, you also need to put a copy on file at the local
land records office. (In just two states, North and South Carolina,
you must record your power of attorney for it to be durable.)
Some banks and brokerage companies have their own durable power
of attorney forms. If you want your attorney-in-fact to have an easy
time with these institutions, you may need to prepare two (or more)
durable powers of attorney: your own form and forms provided by the
institutions with which you do business.
What happens if I don't have a durable power of attorney for
If you become incapacitated and you haven't prepared a durable
power of attorney for finances, a court proceeding is probably
inescapable. Your spouse, closest relatives or companion will have
to ask a court for authority over at least some of your financial
If you are married, your spouse does have some authority over
property you own together -- to pay bills from a joint bank account,
for example. There are significant limits, however, on your spouse's
right to sell property owned by both of you.
If your relatives go to court to get someone appointed to manage
your financial affairs, they must ask a judge to rule that you
cannot take care of your own affairs -- a public airing of a very
private matter. And like any court proceeding, it can be expensive
if a lawyer must be hired. Depending on where you live, the person
appointed is called a conservator, guardian of the estate, committee
or curator. When this person is appointed, you lose the right to
control your own money and property.
The appointment of a conservator is usually just the beginning of
court proceedings. Often the conservator must:
conservatorship isn't necessarily permanent, but it may be ended
only by the court.
- post a bond -- a kind of insurance policy that pays if the
conservator steals or misuses property
- prepare (or hire a lawyer or accountant to prepare) detailed
financial reports and periodically file them with the court, and
- get court approval for certain transactions, such as selling
real estate or making slightly risky investments.
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.
Can my attorney-in-fact make medical decisions on my
No. A durable power of attorney for finances does not give your
attorney-in-fact legal authority to make medical decisions for
You can, however, prepare a durable power of attorney for
healthcare, a document that lets you choose someone to make medical
decisions on your behalf if you can't.
In most states, you'll also want to write out your wishes in a
"living will" (also called a Healthcare Directive or Directive to
Physicians), which will tell your doctors your preferences about
certain kinds of medical treatment and life-sustaining procedures if
you can't communicate your wishes. If your living will is properly
prepared, your doctors are legally bound to respect your wishes or
to transfer you to a doctor who will. Most states now provide
fill-in-the-blanks living will forms.
Find information about healthcare documents in the Healthcare
When does a durable power of attorney end?It ends at your
death. That means that you can't give your attorney-in-fact
authority to handle things after your death, such as paying your
debts, making funeral or burial arrangements or transferring your
property to the people who inherit it. If you want your
attorney-in-fact to have authority to wind up your affairs after
your death, use a will to name that person as your executor.
Your durable power of attorney also ends if:
- You revoke it. As long as you are mentally competent, you can
revoke a durable power of attorney at any time.
- A court invalidates your document. This happens rarely, but a
court may declare your document invalid if it concludes that you
were not mentally competent when you signed it, or that you were
the victim of fraud or undue influence.
- You get a divorce. In a handful of states, including Alabama,
California, Colorado, Illinois, Indiana, Minnesota, Missouri,
Pennsylvania, Texas and Wisconsin, if your spouse is your
attorney-in-fact and you divorce, your ex-spouse's authority is
automatically terminated. In any state, however, it is wise to
revoke your durable power of attorney after a divorce and make a
- No attorney-in-fact is available. A durable power of attorney
must end if there's no one to serve as attorney-in-fact. To avoid
this problem, you can name an alternate attorney-in-fact in your
WillMaker's question-and-answer format lets you
create a durable power of attorney quickly and easily.
You can also make a will, living will and other
Power of Attorney Workbook
Includes all the forms and plain-English
instructions you need to give a trusted person the
authority to handle your financial affairs for you.
Nolo's most comprehensive estate planning tool
explains how to use a Power of Attorney for Finances and
how it fits into your estate plan.