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What is a Durable Power of Attorney?

Estate Planning Attorney Austin Texas Lawyer


Durable Financial Power of Attorney: How it Works

The durable financial power of attorney is a simple way to arrange for someone
to handle your finances.

A durable power of attorney for finances -- or financial power of attorney -- is
a simple, inexpensive, and reliable way to arrange for someone to manage your
finances if you become incapacitated (unable to make decisions for yourself).
A financial power of attorney is a good document to make for yourself, but it
can also be a great blessing for your family. If you become unable to decide for
yourself and you haven't prepared a durable power of attorney, 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
affairs.

When a Financial Power of Attorney Takes Effect
A financial power of attorney can be drafted so that it goes into effect as soon
as you sign it. (Many spouses have active financial powers of attorney for each
other in case something happens to one of them -- or for when one spouse is out
of town.) You should specify that you want your power of attorney to be
"durable." If you don't, in most states, it will automatically end if you later
become incapacitated.
Or, you can specify that the 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.
Again, you must specify that you want your power of attorney to be "durable." If
you don't, in this case, your document will never take effect at all.
Your Agent's Job
When you create and sign a durable power of attorney, you give another person
legal authority to act on your behalf. This person is called your agent or, in
some states, your attorney-in-fact.
Commonly, people give their agent broad power to handle all of their finances.
But you can give your agent as much or as little power as you wish. You may want
to give your agent 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 Social Security, Medicare, or other government benefits
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
transfer property to a trust you've already created
hire someone to represent you in court, and
manage your retirement accounts.

The agent is required to act in your best interests, maintain accurate records,
keep your property separate from his or hers, and avoid conflicts of interest.

Making a Financial Power of Attorney
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 it's not mandatory that you use them.
Some banks and brokerage companies have their own durable power of attorney
forms. If you want your agent to have an easier 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.
You must sign the document in front of a notary public. In some states,
witnesses must also watch you sign. If your agent will have authority to deal
with your real estate, you must put a copy of the document on file at the local
land records office. (In two states, North and South Carolina, you must record
your power of attorney at the land records office for it to be durable.)

When a Financial Power of Attorney Ends
Your durable power of attorney automatically ends at your death. That means that
you can't give your agent 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 agent 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.
You get a divorce. In a handful of states, if your spouse is your agent and
you divorce, your ex-spouse's authority is automatically terminated. In other
states, if you want to end your ex-spouse's authority, you have to revoke your
existing power of attorney. In any case, it's wise to make a new document as
soon as you file for divorce.

A court invalidates your document. It's rare, 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.
No agent is available. To avoid this problem, you can name an alternate agent
in your document.






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