You are likely familiar with the concept of a power of attorney. You may even have executed one at some point in your life without giving it much thought. A power of attorney can be a very useful, and flexible, addition to an estate plan; however, it is extremely important that you understand the authority conveyed in one, particularly in a durable power of attorney.
Despite the name, a power of attorney has nothing to do with your attorney. The two people involved in a power of attorney are referred to as the principal and the agent. If you execute a power of attorney you are the principal. The individual to whom you grant authority in a power of attorney is your agent. By executing a power of attorney, you grant your agent the legal authority to act on your behalf. The extent of the power granted depends on the type of power of attorney you execute.
One type of power of attorney is known as a “special” or “limited” power of attorney. As the name implies, this document grants your agent specific authority instead of sweeping authority. If, for instance, you want your sister to have the authority to access your bank account, you could grant her a specific power of attorney for that purpose only. You might also want to give someone the authority to complete the sale of your boat while you are away on vacation by giving them a limited power of attorney.
A general power of attorney, on the other hand, gives your agent virtually unlimited authority to act on your behalf in all types of legal transactions. Granting someone a general power of attorney should only be done after careful thought and consideration given the power you are giving the individual.
The term “durable” when used in conjunction with a power of attorney means that the authority granted in the document will survive your incapacity or disability. Traditionally, the authority granted in a power of attorney is terminated upon the incapacity of the principal. Because this is precisely when many people want the power to be available, the concept of a “durable” power of attorney was born.
In the state of Texas, a power of attorney must include very specific language for the document to be considered a durable power of attorney. You may create a power of attorney that survives your incapacity or one that takes effect upon your incapacity. In addition, you may make either a general or a special power of attorney durable.
Before executing any power of attorney – particularly a durable general power of attorney – be sure to consult with your estate planning attorney to be sure that it is in your best interest to do so.