What Is a Durable Power of Attorney?

Nobody wants to think about being unable to make health care or financial decisions for themselves. Would your family members know how you want your money handled? What about decisions regarding your medical care?

What is a durable power of attorney?

A POA is a legal document that names someone to make decisions on your behalf. This person is sometimes called an agent or an attorney-in-fact. Typically, you can also designate an alternate agent in case the person you named isn’t available.

An ordinary or nondurable power of attorney automatically ends if you become incapacitated. The word “durable” means that this document remains active even if you become unable to make your own decisions.

If you don’t have a durable power of attorney, loved ones may need to consider if they want to hire an attorney to petition a court to appoint a guardian or conservator. If you’re married, the state would likely name your spouse. Or, it might name your adult children or parents if a spouse is not available or present.

A durable POA generally has two parts:

Durable Power of Attorney for Health Care or medical POA is recognized in all 50 states. But different states use different terms and have their own rules around how to set them up. If you determine a durable POA is right for you, consider discussing options with an attorney to make sure the forms fit with your state’s laws.

Some states combine a POA and a living will. In California, the form is currently called the Advance Health Care Directive  and has five parts. Part one names your agent for health care, while part two is for instructions. Part three covers your options regarding organ donation, and part four lets you designate a physician to make decisions. The last part is the witness and signature provisions. Any part of this form can be omitted or included as long as it includes part five.

Durable Power of Attorney for Financial Matters covers your finances. You might allow the agent to manage your retirement accounts or file your income taxes. When you designate a financial agent or POA, you typically may give them as much or as little authority as you want. Your agent is legally required to act in your best interests. They are required to keep your assets separate from their own and don’t have authority to do whatever they wish.

The process to set up a financial POA varies by state, but most require a notarized signature. The agent is also required to sign paperwork acknowledging their awareness and understanding of their power and restrictions to act.

Some states require POAs to be recorded with local government authorities before the agent can act regarding real estate transactions. A durable POA for financial matters may be generally revoked at any time before the person granting it becomes incapacitated. It automatically ends when the person who granted it dies.

Update your durable power of attorney

You can review and update these documents anytime you want, and that could be important whenever you experience a major life event. Some states will automatically revoke a former spouse’s authority to act as agent upon divorce—others may not.

The decision to appoint an agent is an important personal and legal decision. A consultation with an attorney may help you determine whether it’s right for your situation. Thinking through your future financial and medical needs now may provide peace of mind to your loved ones—especially in times of crisis.