David Lerner Associates: The difference between a power of attorney and a durable power of attorney
A power of attorney is a legal paper that licenses someone to act for you. You mention someone known as an agent or attorney-in-fact (though the person need not be an attorney) who steps into your shoes, legally talking. You can license your agent to perform such things as sign checks and tax returns, enter into contracts, purchase or sell property, deposit or withdraw funds, run a business, or anything else you do for yourself.
A power of attorney could be wide or restricted. Since the power-of-attorney file is customized for its particular function, your agent can not behave outside the scope labelled in the document. For example, you may own a home in a different state that you want to sell. Rather than traveling to that state to complete all the required paperwork, you can authorize someone already in that state to perform this for you. When the deals to sell the home are complete, the agency relationship ends, and the agent no longer holds any power.
A regular power of attorney ends when its function is fulfilled or at your incapacity or death.
A durable power of attorney serves the same purpose as a power of attorney. However, as its name suggests, the agency partnership remains effective even if you become incapacitated. This makes the durable power of attorney an important estate planning tool. If incapacity should strike you, your agent can maintain your financial affairs until you are again able to do so, without any need for court involvement. That way, your family's needs continue to be provided for, and the risk of financial loss is reduced. A durable power of attorney ends at your death.
IMPORTANT DISCLOSURES
Material contained in this article is provided for information purposes only and is not intended to be used in connection with the evaluation of any investments offered by David Lerner Associates, Inc. This material does not constitute an offer or recommendation to buy or sell securities and should not be considered in connection with the purchase or sale of securities.
David Lerner Associates does not provide tax or legal advice. The information presented here is not specific to any individual's personal circumstances.
These materials are provided for general information and educational purposes based upon publicly available information from sources believed to be reliable– we cannot assure the accuracy or completeness of these materials. The information in these materials may change at any time and without notice.
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