When it comes to planning for the future, it is ideal to have a clear understanding of legal documents that grant authority to someone to act on your behalf.
Two commonly used instruments in this regard are the power of attorney and the durable power of attorney. While both serve a similar purpose, they differ in significant ways that can have a substantial impact on your financial and medical affairs.
Power of attorney
A power of attorney authorizes another person to make financial decisions and manage your affairs. This document can be useful in various situations, such as if temporarily unavailable, need assistance with specific transactions or want someone to handle your financial matters due to physical or mental incapacity.
One aspect of a standard power of attorney is that it becomes ineffective if you become incapacitated. In other words, if you are unable to make decisions for yourself due to illness or injury, your agent’s authority under a regular POA ceases to exist.
Durable power of attorney
A durable power of attorney offers more comprehensive and enduring protection. Like a standard power of attorney, it grants someone the authority to act on your behalf, but it remains effective even if you become incapacitated. This durability aspect is important for situations where you may need someone to make critical decisions on your behalf, such as managing your finances or making healthcare decisions, when you cannot do so yourself.
Along with joining the 46% of U.S. adults with a will, including other legal documents helps ensure your wishes unfold the way you want. The choice between a power of attorney and a durable power of attorney depends on your specific circumstances and the level of protection you desire.