A durable power of attorney is legal freedom to delegate to a third party of your choice the powers to transact business on your behalf. The power mainly comes in handy when the person delegating the power is about to become incapacitated. It mainly covers financial and medical issues and is limited only to the duration of the incapacitation.
A durable power of attorney (DPOA) legally enables an individual (principal) to entrust their financial management, including property, with someone else.
The individual entrusted with power of attorney is known as an agent or attorney-in-fact. The principal may set limited or extensive options on the financial powers of the Agent on the durable power of attorney form.
It is important to note that durable powers of attorney only apply to competent individuals who are 18 years and older. When writing and signing the durable power of attorney form, the principal must be mentally stable; otherwise, the legal document may be overruled by a court of law when brought forward by a legally recognized spouse or family.
Though open for just about any other issue, this power is largely taken advantage of when handling financial decisions. These are the ones that are strict enough to warrant official powers. Considering the lack of a unified legal regime governing its operations and use, this power is signed as per each state law.
The durable power of attorney may handle the following financial tasks and purposes:
- Deposits, withdrawals, and inter-account transfers.
- Lending and borrowing
- Safe deposit boxes
- Government and statutory benefits
- Retirement plans and packages
- State and federal taxes
- Legal advice and proceedings
- Real estate
- Personal pieces of property
Understanding Durable Power of Attorney
A durable power of attorney requires the principal’s full comprehension of certain technicalities such as:
When it takes effect
A durable power of attorney may come into effect upon signing or in the event of the principal’s incapacitation, hence using the term ‘durable,’ as defined in Section 102(2) (page 7). Future events such as incapacitation that may prompt a power of attorney to come into effect are known as ‘springing’ powers. This is because the powers can only spring into action upon a specific occurrence.
According to Section 302 –( Page 74), this is an optional form used by the Agent to certify facts relating to a power of attorney. Used as a fraud deterrent, the certification form signed by the Agent helps verify the validity of a power of attorney. The Agent is required to make a sworn statement, under penalty of prejudice, proving a power of attorney is valid with the principal’s authorization to act on his or her behalf.
General /financial power of attorney enables an Agent extensive or limited power over the principal’s finances, real estate business, or legal matters. The principal may give the Agent as much or as little power as they deem fit.
These powers may include:
- Using the principal’s assets to pay for everyday expenses for them and their family
- Make investments
- Managing banking activities
- Overseeing contractual obligations
According to Uniform Power of Attorney, the principal can grant standard authorization over all or some of the following financial power in Section 301 (page 68) :
- Real property- The Agent is authorized to buy, sell and lease property on the principal’s behalf.
- Tangible Personal Property- Allow the Agent to sell or lease personal property.
- Banks and Other Financial institutions- Grants total control over bank accounts, personal or business
- Operations of Entity or Business- The Agent is authorized to make any kind of decision concerning the business or entity
- Insurance and Annuities- The Agent is authorized to cancel, upgrade or redeem insurance or annuity
- Estates, Trust, and Other Beneficial Interests- The agent is responsible for any estate trust or any other entity that transfers to the principal’s beneficiaries upon death.
- Claims and Litigations- The principal may authorize the Agent to make decisions on any current claims or pending legal matters
- Personal and Family Maintenance-This grants the Agent with authorization of individual and family maintenance.
- Benefits from Government Programs, Civil or Military service- This is any program, benefit, or assistance provided by a statute or regulation including Social security, Medicare, which can be claimed by the Agent assigned.
- Retirement Plan- This means that the Agent, if assigned, may amend any retirement plan.
- Stocks and bonds- The Agent may sell shares or stock of bonds if authorized.
- Taxes- The Agent may act in accordance with the power of attorney granted by the principal; to prepare, sign and file federal and foreign income; act as the principal in all matters for all periods before the IRS or other taxing authority; pay taxes due, collect refunds post and receive bonds.
An agent believed and proven to violate the principal’s guidelines, or legal responsibilities is likely to be penalized, as per Section 117 (page 30) by:
- reinstating the value of principal’s property to what it is proven to have been if the violation had not occurred; and
- reimbursing the principal ‘s interest for the attorney’s fees and cost paid on the Agent’s behalf.
Ending of Financial Power of Attorney
Death automatically ends durable power of attorney. An agent can only be granted authority to wind up a principal’s affairs if named as an executor in their will.
A durable power of attorney will generally end under the following circumstances:
If Revoked-As long as the principal are mentally competent, they retain the freedom to revoke a durable power of attorney when they deem it necessary. For the power of attorney to be canceled, there must be the authorization of a revocation form.
Once signed by the principal, a revocation form cancels and immediately ends any Agent authorization may have been granted in the power of attorney document. The principal is required to give the form to the Agent via certified mail. Any other institution, business, or agency should be notified of the change with immediacy.
The most common reasons for revocation are;
- Principal losing the desire for power of attorney
- Change of Agent
- Once the desired purpose is fulfilled
- Inappropriate completion of requirements by Agent
- The Agent has lost a desire to hold a power of attorney.
Other reasons include;
- Divorce- In the event of divorce and the now ex-spouse who had been authorized as an agent is automatically terminated. However, this is dependent upon the state; it is also rare. Some states demand the revocation of power of attorney. The vital point to comprehend is that a decision must be made once the divorce is filed.
- Invalidation of the document by a court- A court concludes that the principal was mentally incompetent during the signing of the document or was a victim of undue influence or fraud.
- An agent’s unavailability- In such a circumstance, the principal may name an alternate agent.
Uniform Power of Attorney Act (UPOAA).
Since 2007 there has been an adoption of the Uniform Power of Attorney Act (UPOAA) by 28 states. The UPOAA laws were created by the National Conference of Commissioners of Union State Laws (ULC), aiming to bring consistency by providing all 50 states with common guidelines. These guidelines can be found in the Uniform Power of Attorney Act (UPOAA) Statutes (Revised 2006).
According to UPOAA Section 102(2) (page 8), durable power of attorney means any writing or recording that grants power to the Agent to act in the principal’s place is regardless of the use of the term ‘power of attorney.
Definition of Durable
According to Section 102(2) (page 7), durable means that the power of attorney is not terminated upon the incapacitation of the principal. This term’s use in the power of attorney form is what ensures the Agent is able to exercise power even in the eventuality of incapacitation.
Signing on Principal’s Behalf
Section 301 (Page 70) states that an agent’s identity must be disclosed whenever acting in writing or print on behalf of the principal. The name of the principal and signing as Agent must appear as follows.
(Principal’s Name) by (Your Signature) as Agent.
The following 28 states have enacted the UPOAA since its national adoption in 2007:
|Connecticut||2015||Public Act No. 15-240|
|New Hampshire||2017||SB 230 FN|
|New Mexico||2007||HB 231|
|North Carolina||2017||SB 560|
|South Carolina||2016||SB 778|
|South Dakota||2020||SB 148|
|West Virginia||2012||HB 4390|
As written in Section 301 (page 66), the statutory form enables the principal to designate one Agent. Provisions in the form also allow for the naming of a co-agent. However, co-agents are not required to work together unless stated in the Special Instructions.
Durable Power of Attorney Forms
This is the document that the principal signs allowing the Agent to manage their financial affairs while alive. In the event of incapacitation, this document protects the principal’s healthcare and finances with a trusted individual. This form differs from state to state, and it is recommended to check on technicalities that may vary in the state as opposed to other states.
Durable POA Forms (by State)
Free POA Form
Getting a Durable Power of Attorney
The decision to grant someone else a durable power of attorney may require a lot of self-evaluation, especially when it comes to trust; however, to help get power of attorney, a principal needs to:
- Get an Agent– This is someone the principal trusts to make rational and informed decisions about their finances.
- Make 3 Durable POA Forms– It is recommended to bring 3 copies to be signed
- Find a Witnesses/Notary Public– The form is required to be signed by either a witness or a notary public, depending on the state.
The following steps will ensure that the process of obtaining durable power of attorney is fast and smooth:
Download the form
Depending on the state, an individual can download a statutory form; this is common in most states. The principal may also download a standard template authorized by the state in Adobe PDF, Microsoft Word (.docx), or Open Document Text (.odt).
Select the financial powers
Once the form is downloaded, the principal will have to select the powers of attorney they wish to give in the event of incapacitation. Spouses are most commonly given financial power of attorney over personal and business bank accounts; however, if the principal has a partners, they can make multiple powers of attorney forms and authorize items related to the business reserving the personal financial decisions to the spouse.
Effective immediately or upon disability
The principal, must decide on when they wish for the power of attorney to come into effect. Whether effective immediately upon signing of the document or in the event of disability /incapacitation, in which case a licensed physician will make the determination in accordance with State Law.
Prepare the form for signature
States have their own signing requirements. As such, the principal will have to find out what their state’s signing requirements are as well as gathering the agents for the signing before a witness or notary of public. The three copies required ensures each party has an original copy.
Storing the form
With legal authorization complete, keep the form somewhere safe. Knowledge of the document’s location should be kept to a minimum of one person. Keep the document with other sensitive files if home is safest.
General POA Vs Durable Power of Attorney
The power of attorney (POA) only allows the Agent to make decisions and act in regard to a principal’s property which is inclusive of whether or not they are able to act for themselves. The Agent is entitled to reasonable compensation unless Special Instruction states otherwise.
Remember: The power of attorney (POA) is immediately effective upon signing the document unless the principal states otherwise in the Special Instructions.
Even though the durable general/financial power of attorney only designates one Agent, a co-agent may be named in the Special Instructions. A successor agent may also be included in the Special Instructions if the Agent has chosen is unable or unwilling.
Durable POA Vs Medical Power of Attorney
This form is the basic health care of attorney that combines different state legal requirements into a universal legal form. Space for any Special instructions or limitations is included. The principal must keep in mind the need to discuss their priorities and wishes with the Agent and those they consider close to them before assenting to it. The principal should also consider when or any instances that may prompt the power of attorney to come to effect.
Legal recognition of durable power of attorney document requires the principal’s signature to be completed as per the following respective State laws:
|Alabama||Notary Public||§ 26-1A-105|
|Alaska||Notary Public||§ 13.26.600|
|Arizona||Notary Public and 1 Witness||§ 14-5501|
|Arkansas||Notary Public||§ 28-68-105|
|California||Notary Public or 2 Witnesses||§ 4402(c)|
|Colorado||Notary Public||§ 15-14-705|
|Connecticut||Notary Public and 2 Witnesses||§ 1-350d|
|Delaware||Notary Public and 1 Witness||§ 49A-105|
|Florida||Notary Public and 2 Witnesses||§ 709.2105|
|Georgia||Notary Public and 1 Witness||§ 10-6B-5|
|Hawaii||Notary Public||§ 551E-3|
|Idaho||Notary Public||§ 15-12-105|
|Illinois||Notary Public and 1 Witness||§ 755 ILCS 45/3-3|
|Indiana||Notary Public||IC 30-5-4-1|
|Iowa||Notary Public||§ 633B.105|
|Kansas||Notary Public||§ 58-652(3)|
|Kentucky||Notary Public||§ 457.050|
|Maine||Notary Public||§ 5-905(1)|
|Maryland||Notary Public and 2 Witnesses||§ 17–110|
|Massachusetts||2 Witnesses||§ 5-103|
|Michigan||Notary Public or 2 Witnesses||§ 700-5501(2)|
|Minnesota||Notary Public||§ 523.01|
|Mississippi||Notary Public||§ 87-3-105|
|Missouri||Notary Public||§ 404.705(3)|
|Montana||Notary Public||§ 72-31-305|
|Nebraska||Notary Public||§ 30-4005|
|Nevada||Notary Public||§ 162A.220(1)|
|New Hampshire||Notary Public||§ 564-E:105|
|New Jersey||Notary Public||§ 46:2B-8.9|
|New Mexico||Notary Public||§ 45-5B-105|
|New York||Notary Public||§ 5-1501B|
|North Carolina||Notary Public||§ 32C-1-105|
|North Dakota||No Statute|
|Ohio||Notary Public||§ 1337.25|
|Oklahoma||Notary Public and 2 Witnesses||§ 58-1072.2|
|Pennsylvania||Notary Public and 2 Witnesses||§ 5601(b)(3)|
|Rhode Island||Notary Public||§ 18-16-2|
|South Carolina||Notary Public and 2 Witnesses||§ 62-8-105|
|South Dakota||Notary Public||§ 59-12-4|
|Texas||Notary Public||§ 751.0021|
|Utah||Notary Public||§ 75-9-105|
|Vermont||Notary Public and 1 Witness||§ 3503|
|Virginia||Notary Public||§ 64.2-1603|
|Washington||Notary Public or 2 Witnesses||§ 11.125.050|
|West Virginia||Notary Public||§ 39B-1-105|
|Wisconsin||Notary Public||§ 244.05|
|Wyoming||Notary Public||§ 3-9-105|
National laws only provide a basis in which state laws should be entrenched. As such, it is recommended that the principal ensures they are aware of any state laws surrounding durable power of attorney in their state. Here is a breakdown of states and their statutory form:
Frequently Asked Questions (FAQs)
Both ‘powers of attorney’ entail the delegation of the power of transacting business to a third party. The durable power of attorney is however used when the principal is mentally incapacitated and hence unable to do so on his own.
The ‘general power of attorney’ on the other hand is used when the principal is still in his right state of mind. Its scope is hence limited and usually comes to an end as soon as the principal changes his mind.
Yes. In both cases, the person has to be trustworthy enough not to jeopardize the health or wellbeing of the principal. Also, many jurisdictions do not impose any limit on who exactly may act on behalf of a principal. The principal hence has the discretion to appoint whomever he wants to act on his behalf.
Of course, yes! That is why you have to choose that person whom you trust and is well known to you. In the unlikely event that the person eventually steals your property and money, there is no room for despair either. You can still seek legal redress in a competent court of law.
Many jurisdictions require that you sign 3 copies. The first one is retained by you, the second one is retained by the witness whereas the third one is held by the state. Some may require an extra one to be held by the attorney who facilitates the entire process.
Yes. Delegating the powers to a third party does not in any way imply that you can no longer do so on your own. Moreover, you also have the freedom to quash those powers any day at any time.
YES, you can! You have to follow the laid-down procedures though to make the new agent valid and legally recognized. Some jurisdictions may, however, impose a limit on just how many times you may change an agent. Be sure to familiarize yourself with these restrictions too!
Yes, you can! As the change of agent above, there are procedures you have to follow to make the new changes valid. It is in your best interest to follow those processes to the later to prevent any confusion and ambiguities.
As a principal, you have the power to revoke this POA at any time. The processes involved vary from state to state. These differences notwithstanding, you will have to bring all the parties to the agreement on a round table and notify them of your intent. Lastly, you will also have to fill all the forms and deposit them with the relevant state office.
Durable power of attorney is essentially structured to give peace of mind in the management of a person’s financial affairs for them and their family, in the unforeseen event of incapacitation. It is imperative to understand the signing requirements of one’s state to avoid any future setbacks that may arise in their power of attorney. Understanding the technicalities of the DPOA form will seamlessly speed up the process for the principal, the Agent, and that of the family.