How Durable is Your Power of Attorney?

How Durable is Your Power of Attorney?

In law, we often use words that have a plain meaning to non-lawyers in ways that don’t mean what you think! Is that so we can confuse you? Is it to introduce enough uncertainty that you need to hire us? Maybe.

One of those words that means something different in law is “durable.” And durable is typically used in conjunction with powers of attorney. So just what is a durable power of attorney? And for that matter, what’s a power of attorney?

Many people confuse wills with powers of attorney. But they are distinctly different in that a will has no effect until the person who wrote it dies. Conversely, a power of attorney becomes invalid when the person who wrote it dies. In other words, a power of attorney is a document that gives someone else the legal authority to act on your behalf…while you are alive.

Within that definition, there are a few different types of powers of attorney. You can create a limited power of attorney that only gives one or a few powers to the other person. (The other person is actually called the “attorney-in-fact.”). This is done more frequently than you probably realize. For example, when you purchase a car, buried in that paperwork is a limited power of attorney that appoints the dealership as your attorney-in-fact but only to execute documents in necessary to complete the sale or trade. And when you go to a real estate closing, one of the documents is a limited power of attorney that allows the closing agent to complete needed paperwork on your behalf.

Of course, the most common time when a person finds himself or herself contemplating a power of attorney is during the estate planning process.

The power of attorneys executed as part of an estate plan are typically what are called durable general powers of attorney. The term “general” refers to the fact that the document provides the attorney-in-fact with all of the powers allowed by law. So, for example, if you execute a general power of attorney to your child, that child has the legal power to do pretty much anything you can do. That includes banking and investment transactions, buying and selling real estate and vehicles, and obligating you by signing contracts on your behalf. The only real power that you don’t give to the attorney-in-fact in a general power of attorney is the power to rewrite your will. That would be dangerous, huh?

The term durable means that the power of attorney survives your incompetence, although it still expires at your death. By inference then, a non-durable power of attorney is only valid as long as the creator of the power of attorney is sane.

To recap those rules, a non-durable power of attorney is valid as long as you are alive and sane. A durable power of attorney is valid as long as you are alive.

Since the likely scenario when you would need someone to transact business on your behalf would be if you are unable to do it yourself, i.e., do not meet the test of competency and sanity, durable powers of attorney are used in estate planning, specifically, the general kind.

By the way, you can have multiple powers of attorney all active at the same time. You could (and we often do) execute one in favor or a spouse and another in favor of one or more children.

And, if you aren’t comfortable handing the reins of your life to your child just yet, there is no legal reason that you have to let them know you have executed the power of attorney! You can tuck it in a drawer and let them find it when they are going through your papers later in life.