Part of having a complete estate plan is thinking ahead about who should be in charge of your finances if you become mentally incapacitated at some point during your life. One of the essential documents in your incapacity plan is a Financial Power of Attorney, and many people have a Durable Financial Power of Attorney.
What Makes it Durable?
With a Durable Power of Attorney, you appoint an agent to manage your assets and make financial decisions for you, and not only does your agent have immediate authority to act on your behalf, that authority continues in the event of your disability. There’s another type of Power of Attorney, called a “Springing” Power of attorney, which only takes effect after you’ve been declared mentally incapacitated.
The Practical Difference
Here’s the practical difference: if you appoint an agent using a Durable Power of Attorney, he or she can pay bills on your behalf, access bank accounts, and otherwise act on your behalf even while you’re completely well and able to handle your finances on your own. So, if you take an extended vacation or need to go into the hospital, your agent can help make sure that your financial affairs run smoothly. With a Springing Power of Attorney, your agent is limited to acting on your behalf once there’s been medical determination that you are incapable of managing your own affairs.
Your estate planning attorney can help you decide which type of Power of Attorney you need, and can help you put in place an effective incapacity plan.
The Mendel Law Firm, L.P. is a member of the American Academy of Estate Planning Attorneys.