Question:
What’s the difference between a power of attorney and a durable power of attorney?
Answer:
A power of attorney is a legal document that authorizes someone to act on your behalf. You name someone (known as an agent or ‘attorney-in-fact’ even though the person doesn’t need to be an attorney) who steps into your shoes, legally speaking. You can authorize your agent to do things like sign checks and tax returns, enter into contracts, buy or sell real estate, deposit or withdraw funds, run a business, or anything else you might otherwise do for yourself.
The powers given can be broad or limited. And since the legal document is tailored for its specific purpose, your agent can’t act outside of the scope allowed. For example, you may own a home in another state that you want to sell. Instead of traveling to that state to complete all the necessary paperwork, you could authorize someone already in that state to do this for you. When the transactions to sell the home are complete, the agent no longer holds any power. Once its purpose is fulfilled—or at your incapacity or death—a regular power of attorney ends.
A durable power of attorney serves the same function, but as its name implies, the agency relationship remains effective even if you become incapacitated. This makes the durable power of attorney an important estate planning tool. In the case of your incapacity, your agent will be able to maintain your financial affairs until you are again able to do so yourself, without any need for court involvement. It’s a way to ensure that your family's needs can continue to be provided for, and to reduce the risk of financial loss. Upon your death, however, a durable power of attorney ends.
