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Home » Why Is a Durable Power of Attorney Different?

Why Is a Durable Power of Attorney Different?

April 7, 2016Durable Power of Attorney

Durable Power of AttorneyThough your estate plan will likely start with the execution of a Last Will and Testament, a well thought out and effective estate plan will likely include a number of additional estate planning tools and strategies. One commonly used estate planning tools is a power of attorney. In fact, you may find use for a power of attorney outside of your estate plan as well as using more than one within your estate plan. Though a power of attorney can be a very effective estate planning tool, it can also wreak havoc on your plan if used improperly and/or without understanding the type and degree of authority you grant to your Agent. You may, for example, wish to include a durable power of attorney in your estate plan; however, you must first understand why a durable power of attorney is different from a traditional power of attorney.

What Is a Power of Attorney?

A power of attorney, or POA, is a legal agreement whereby a Principal (the person creating the POA) grants and Agent (the person to whom power is given) the legal authority to act on behalf of the Principal in legal matters. The type and extent of the authority granted depends on the kind of POA created by the Principal.

General vs. Limited Power of Attorney

A Principal can create a general or a limited POA. A general power of attorney grants an Agent almost unlimited power to act on behalf of the Principal. This means the Agent can do things such as enter into a contract in the Principal’s name, sell or encumber assets owned by the Principal, or even withdraw funds from an account owned by the Principal. For this reason, it is imperative that you think long and hard before executing a general power of attorney.

A limited, or special, power of attorney only grants an Agent specific, limited, powers to act on behalf of the Principal. For example, you might give an Agent a limited POA that allows the Agent to facilitate the sale of your home at the closing because you plan to be out of the country on the date of the scheduled closing. Parents also typically grant a caregiver the limited POA to consent to medical treatment for a minor child during the time period a child will be in their care.

A power of attorney can also be a “springing” power of attorney which means the authority granted in the POA will only “spring” into action upon the occurrence of a specified event. For example, you might execute a springing POA that only becomes active if you are out of the country or otherwise unavailable.

What Is a Durable Power of Attorney?

Traditionally, the power granted to an Agent in a power of attorney would terminate upon the death or incapacity of the Principal. The possibility of incapacity, however, is precisely why many people want to have a power of attorney in place. With that in mind, the concept of a “durable” power of attorney evolved. If a POA is durable it simply means that the power granted to the Agent survives the incapacity of the Principal. Therefore, the POA only terminates upon the death of the Principal unless it is revoked or includes a termination date within the document itself.

Some states now presume that a POA is durable unless the Principal specifically indicates it is not while other states require language in the power of attorney document indicating the intent of the Principal to make the POA durable. The State of North Dakota falls into the latter category. The North Dakota Uniform Durable Power of Attorney Act requires the Principal to use very specific language when creating a power of attorney for it to be considered a durable POA. This is one of the many reasons why you should always work with an experienced estate planning attorney when creating a power of attorney.

Contact Us

For more information, please download our free report “Can You Trust Your Estate Plan?” If you have additional questions about estate planning in the State of North Dakota contact the experienced estate planning attorneys at German Law by calling 701-738-0060 to schedule an appointment.

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Raymond German, Estate Planning Attorney
Raymond German, Estate Planning Attorney
Attorney at German Law | Wealth
Raymond J. German provides a wide range of estate planning services to his clients, with a primary focus on creating peace of mind providing for the security of their loved ones, reducing taxes and avoiding a probate, all with a well-crafted estate plan. Mr. German defines the mission statement for German Law as “Helping one family at a time pass on values, beliefs and finances, that can be shared for generations to come.”
Raymond German, Estate Planning Attorney
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