We are constantly stressing the importance of having a well-rounded estate plan, elements of which include both a will and a power of attorney. Before having either document drafted, it is imperative to understand the nuances of both. For example, did you know that there are two types of powers of attorney? There is a durable power of attorney and a non-durable power of attorney. Knowing the difference between the two is necessary to make sure you create a document that suits your needs.
Non-Durable Power of Attorney
A Non-Durable Power of Attorney automatically terminates if you become incapacitated, and at death. This means the agent you appointed in the document will lose authority after any one of those circumstances occurs. When that happens, a court will have to appoint a conservator for you to handle your personal and business affairs.
Durable Power of Attorney
A Durable Power of Attorney, which usually includes a “financial” or “general” power of attorney, will become or will continue to be effective even if you become incapacitated. A Durable Power of Attorney can be created by including certain specific statements in the document. These statements need to be very well drafted, and they make the difference between a durable and non-durable power of attorney. As with the Non-Durable Power of Attorney, a Durable Power of Attorney becomes ineffective immediately upon the death of the creator of the power.
The Power of Attorney is a very important document in your estate plan, but it can also be the most dangerous document you will sign. It can be dangerous because they often grant broad, mostly unchecked, power to someone else to handle your finances. That said, it should still be included as part of your estate and financial planning. It can be used in many ways to save you money and time in the long run, and it does not cost a lot of take much effort to draft and execute one. Creating a Power of Attorney can save the hassle of going to probate court to have a conservator appointed if you have an illness or accident that prevents you from handling your personal and business matters. They are an essential tool to help fund your living trust if you become incapacitated.
If granting broad powers to someone to conduct business on your behalf is a concern, limitations can be placed in the document, limiting its effectiveness unless you are incapacitated. All of this should be discussed with your attorney and understood by you.
It’s also important to remember to “refresh” your power of attorney. If it is more than 3-5 years old, many financial institutions are reluctant to accept the power of attorney, even if it is legally valid.
The Astill Law Office has provided high quality legal services for over 30 years. We represent individuals and business owners and specialize in wills, trusts, estate planning, and asset protection. If you have any questions about creating a Power of Attorney or estate planning in general, contact The Astill Law Office at 801-438-8698.