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 and 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.
You can also learn about other types of powers of attorney you might need.
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.
Alternatively, 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. However, springing powers of attorney can cause serious delays and problems for your agent.
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:
The agent is required to act in your best interests, maintain accurate records, keep your property separate from the agent's own property, and avoid conflicts of interest.
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. (See more on this below.)
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 land records office in the county where your real estate is located. (In two states, North and South Carolina, you must record your power of attorney at the land records office for it to be durable.)
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:
It's natural to assume that your financial power of attorney will be readily accepted by any financial institution. But in reality, banks sometimes do refuse to accept perfectly valid POAs or stall the process for your agent. Working with your financial institutions now can prevent problems and delays in the future. For more on the steps you can take, see Can Banks Refuse a Power of Attorney?
Nolo's Quicken WillMaker can create a durable financial power of attorney for you, along with a will and other important documents.
To see everything Nolo has to offer when it comes to creating a financial power of attorney and planning your estate, visit our Wills, Trusts & Estates Center.