Situations may arise that make it impossible to perform your legal financial responsibilities. During this time, you need a qualified proxy to act like you. Otherwise, you may put your family, business, or partners at risk. A Durable Power of Attorney empowers another person to execute your financial duties. As the principal, you define the scope for your agent. You can widen his or her activities to include banking services, retirement, pension, and investments.
A power of attorney is a legal situation where you empower someone else to act on your behalf. You define and determine how much power your agent wields. Afterward, he or she can transact businesses and negotiate deals in your name.
A durable power of attorney form refers to an official document that transfers your financial power to another person (your agent) if you cannot ever do so. The term “financial” signifies issues relating to money, investment, and profits.
For instance, your agent can supervise the selling of your properties such as homes and cars.
Moreover, the “durable” component shows that the agreement remains binding during a mental, emotional, and physical breakdown. However, it terminates upon your death.
How It Works
There may be circumstances where you lack the mental, physical, or emotional stability to perform your financial duties. At such points, you need someone to undertake your duties. He or she becomes your financial manager, overseeing your income and expenses.
Due to the gravity of such assignments, you should be careful who you choose. Consider your spouse, siblings, and close family members first. Moreover, a durable power of attorney allows you to protect them financially.
Benefits of Using a Durable Power of Attorney Form
Some of the benefits of creating a durable power of attorney form include:
- It saves you from financial and psychological stress during a lawsuit, especially if you are mentally incapable to do so.
- It prevents the court from imposing a guardian on your properties and investments. Thus, you can assign someone who trust.
- It safeguards your assets and investments when you travel abroad. Since you have someone in charge, you still have total control over your resources.
- You can keep your financial reports and standings private, compared to when a court assigns a conservator.
Durable POA vs Medical POA
As mentioned earlier, the scope of a durable POA covers all financial transactions. The principal decides how much power he or she transfers to their agent.
A medical POA empowers an agent to act on behalf of the principal during serious medical conditions. However, he or she can only act when the principal becomes mentally unstable. Other situations it may cover include organ transplants, critical surgeries, and body handling after death.
Simply, a durable POA is more comprehensive and far-reaching than its medical counterpart is.
Durable POA vs General POA
A durable financial power of attorney continues to bind the signee during mishaps. Even when you become debilitated, your agent can act in your stead. Each state determines the condition for incapacitation. Some of these conditions include dementia, Alzheimer’s disease, coma, and stroke. Often, it terminates upon the death of a partner.
Conversely, a general POA covers situations where both parties rely upon each other financially. It could be a business contract, partnership, or negotiation. This agreement becomes invalid if either party becomes medically unstable to perform his activities. As such, it lacks the attributes of its durable components.
Duties you Can Assign in a DFPA
As mentioned earlier, you can transfer some or all of your financial duties to your agent. These responsibilities that can be transferred to your agent will include but not limited to any of the ones stated below:
You can direct your agent to accept gifts, profits, and payouts on your behalf. This authorizes the agent to accept all gifts and compensation that are due to you on your behalf as long as the contract stands.
Your agent receives the capacity to oversee your financial statement and responsibilities. All financial decisions, spending, and savings would be solely handled by the agent.
Open financial account
Your agent can register for government aids, retirement packages, and bank accounts in your name.
Purchase and sell assets
You can transfer your capacity to acquire and trade your properties and possessions to an agent using the DPOA. The agent would have the right to acquire both tangible and intangible assets in your name sometimes with or without recourse to you.
Keep safe deposit box
The Agent has the power to keep and have access to the safe deposit box of the principal with all its content except otherwise stated in the durable power of attorney document.
Lending or borrowing
You empower your Attorney-in-fact to supervise your debt and its repayment. All repayments and remittances would be handled by the agent until the power is revoked.
When you add your initials to this section, the agent can accept, manage, and reject governmental aids on your behalf. For instance, Medicare and grants. The agent would have the sole discretion to treat all transactions related to you in this way.
Retirement plan and insurance
He or she can control your individual retirement account (IRA) as they seem fit. They can also handle your insurances and make plans about them either with or without your consent.
You can assign your tax-related activities to your agent. However, you may fill other forms personally or in their presence. This would definitely have to be covered in the DPOA signed to show the extent to which the agent’s powers extend.
Seek legal advice
The Agent has the right to seek legal advice on your behalf in the event that litigation or case arises. The DPOA gives them the sole right to act on you behalf in this capacity with or without recourse to you.
Uniform Power of Attorney Act (UPOAA)
Before 2006, different states had individual frameworks guiding the authorization. However, the Uniform Power of Attorney Act (UPOAA) came as a worthy improvement over the durable power of attorney form and Uniform Probate Code.
The UPOAA is a set of laws that the National Conference of Commissioners on Uniform State Laws (ULC) developed for adoption by all states in 2007. Presently, 28 states have signed it into law.
Twenty-eight states have adopted the UPOAA.
|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|
For a durable power of attorney form to be recognized as legal signatures of the major principal would have to be appended as is the law of each of the respective states. As each state has a signing requirement, the authorized signatories or notaries for each state would duly sign.
The Power of attorney must :
- Contain the appropriate date of execution
- Must be signed by the principal or another adult whom must be present before the principal and must be under the direction of the principal.
- Be signed and acknowledged before a notary public or signed by two witnesses as the state law states.
- Also express you your authority as attorney-in-fact when signing.
To sign for a principal, an agent will follow this format:
(Principal’s Name) by (Agent Signature) as Agent. (Section 301 – Page 70)
This is a voluntary form for an agent to affirm their endorsement by the principal. Whenever he or she signs, it must be before a notary public. (Section 302 – Page 74)
Revocation of Agent
In Section 301 of the UPOAA, any of the following situations could signify the end of this approval.
- The principal dies
- The principal initiates and approves a revocation form.
- Dissolution of marriage, where a spouse is an agent. It may be automatic or initiated based on the prevailing state laws.
- The duration or purpose of the endorsement is accomplished.
Acting as an agent in the durable power of attorney form comes with its downsides as the actions of the agent in question might negatively impact the principal which might lead to litigations or outright loss of the client/principal:
- Refund/Restore the principals property: In the event that a principal loses his/her property due to the actions of the agent, the agent is required to restore all lost properties to the state it should have been if the loss never occurred.
- Attorneys Fees compensation: In the event that litigation arises and costs are accrued by obtaining a judgment against the agent, the Principal can request that the Agent pays all the cost associated with getting the judgment.
Though an agent is not liable if the value of a principal property declines on its own but he might be held liable if the decline in value is caused knowingly or unknowingly by the agent without recourse to the principal.
If an agent is in violation of his duties, the principal can take legal actions against him/her, and all losses incurred before and during the litigation process can be charged to the agent.
Situations When a Financial Power of Attorney Ends
This agreement has a lifecycle that ends when you die. As such, your agent lacks the legal backing to execute your will. He or she cannot clear your credit, mortgage, or personal debts. Also, he or she cannot dictate your funeral arrangement, or assign your assets to new owners.
Besides, a durable financial power of attorney form can cease to exist under the following conditions:
Cancellation by the principal
As the initiator of the agreement, you reserve the right to revoke such authorization. However, the law states that you must be mentally capable to do so. It is imperative to choose someone you trust to avoid undue arguments and court proceedings.
Separation between a couple
Upon marriage, people transfer their financial power of attorney to their companions. As long as the marriage stands, the agreement remains binding. However, when spouses divorce, there is a need to revisit authorization. In some state laws, the process is automatic. However, some laws require you to file for cancellation of authority. Either way, the end of the relationship signifies the termination of such powers.
When a court declares you mentally incapable of signing the durable power of attorney form, it becomes null and void. Although this is uncommon, a court reserves the right to suspend your authorization. Also, if the court realizes that you signed under duress, it may cancel the agreement.
Absence of agent
If your agent is unavailable during critical mental or physical challenges, your authorization might become invalid. Moreover, remember that your agent cannot transfer this right to a third party. To prevent such occurrences, include a backup agent in your durable power of attorney form.
What You Will Need to Get a DPOA
Firstly, you need the durable power of attorney form. It contains the information and powers you want to transfer to your agent. Moreover, ensure it conforms to your state’s requirements. Secondly, get an agent, who should be an individual you trust and respect. Thirdly, you will notarize the document after all parties have placed their signatures.
Before you get a durable power of attorney form, you need to have these items:
- Agent: a person whose judgment you can trust on managing your assets and finances. This could be your spouse, sibling, or close friend.
- Backup Agent: an alternative person that stands for you when your authentic agent is absent.
- Durable Power of Attorney Form: it is a blank document that contains information for your agent and yourself. It is advisable to have three copies.
- Notary Public: an officer capable of administering statutory declarations such as DPOA. Also, he authenticates your signature, your agent’s, and those of your witnesses.
The 5 Steps to Get a DPOA
Trust and respect are key attributes to watch out for in your supposed agents. Otherwise, you may find yourself in a financial mess which definitely would not bode well for you.
Step 1 – Download the form
Each state has an official durable power of attorney form template for its citizens. Failure to use this template may result in disapproval. Besides, this form is available in Microsoft Word, Adobe PDF, and Open Document Text formats.
Step 2 – Select the Financial powers
The next step is to select the power you wish to transfer to your agent. If this is your spouse, you may have minimal worries. Meanwhile, if you have business partners, you can share the financial responsibilities. Whereas your spouse handles strictly personal finance matters, your partner overseas business transactions.
Step 3 – Effective immediately or upon disability
When will the form come to effect – now or when you become debilitated? Most principals will select the latter option. Also, you can choose specific periods when it will become effective. For instance, when you travel abroad. It takes a licensed Medical Expert to determine debilitation.
Step 4 – Prepare the form for signature
Consider the guidelines of your state before appending your signature. Some states demand the signatures of your main and backup agents before a notary public or witnesses. Afterward, make at least three duplicates so that all parties have a copy.
Step 5 – Storing the form
Once you complete the authorization, keep it in a safe place. Ensure that someone close to you knows the location for future purposes.
How to Write a DPOA Form
Below is a format for creating a durable power of attorney form. Also, note that it is not limited to only this as others have their own methods of preparing it. But the following would give you an idea on how to quickly create a sound power of attorney;
Date of writing
This should always be included at the top of the durable power of attorney form to state the day the power of attorney was initiated. This is a very crucial item on the power of attorney and would clearly show the time it was established.
Details of the principal
As the transferor, your title and name should be at the top of the durable power of attorney form. This would notify the recipient of the person issuing the power of attorney and any other details.
- Location of the transferor: Include your street, county, and state addresses. The correct address should be included as this would notify the recipient of the location the transferor is presently residing at the moment.
- Effective Date of enforcement: There are two options available. “A” sets the agreement into an immediate effect, regardless of circumstances. “B” authorizes the agent only when you are certified incapable by a Medical Practitioner.
The Agent and its job
Due to the immense responsibilities of the agent, ensure you select a trustworthy person. To avoid a clash of interest, be explicit about his or her roles. All the duties of the agent has been explained earlier in this article and should be well explained and understood by the agent before assigning them the responsibilities. This would help the agent get proper information about his/her job and liabilities and enable them to make a choice to take or leave the offer.
- Agent. A.K.A Attorney-in-fact: It refers to the recipient of the transferred power and authority. This is definitely needed. You cant exclude the name of the recipient of the durable power of attorney form in the document.
- Address of agent: It contains the street, county, and state address of the Attorney-in-fact. Just as the address of the principal is required, the correct date of the agent A.K.An Attorney-in-fact is also required on the durable power of attorney form.
Signatures of the principal and agent would have to provide on the durable power of attorney form to show consent of both parties to undertake the agreement.
Notarization by a notary public
The durable power of attorney form would have to be authenticated by a notary public and the signatures appended should also be notarized by a notary public to validate it.
Free Downloads (DPOA Forms & Templates)
A durable power of attorney form exists to protect your interest when tragedy strikes. However, consider the values of your agent before transferring some responsibilities. Also, you can terminate the agreement anytime you desire.
There are several easy-to-use durable power of attorney forms on our website. Download them here:
Forms by State
Frequently Asked Questions
Why is FreeWill free?
An extensive network of nonprofit organizations provides financial support.
Do I need any other documents along with durable power of attorney form?
You can customize a will to suit your preferences.
Is it legally effective?
Of course. FreeWill forms adhere to the provisions of each state’s laws.
Can I change my DFPA?
Of course. As the transferor, you can rescind such authorization whenever you choose.