There are two types of Financial Powers of Attorney: Durable and Springing. Both allow you to appoint someone you trust, called your Attorney-In-Fact, to conduct financial and legal transactions on your behalf, manage investments for you, buy and sell property in your absence, and generally be your stand-in for the financial side of your life. So, what’s the difference? Timing.
Durable Power of Attorney
A Durable Power of Attorney takes effect the moment you sign it, and lasts until it’s revoked, either by your actions or by your death. This means that if you create and sign a Durable Power of Attorney and then become mentally incapacitated, the Power of Attorney remains in effect, and your Attorney-in-Fact continues to have the authority to manage your finances and assets.
So, a Durable Power of Attorney is used for two purposes. The first purpose, before you become mentally incapacitated, is primarily convenience. If you need to be out of town or in the hospital, your Attorney-in-Fact can handle your bills, take care of your bank accounts, and manage any other financial transactions that need to be taken care of.
The second purpose comes into play if you become mentally disabled. At this point, ideally, your Attorney-in-Fact can take over your financial dealings altogether, so that you can avoid the need to have a guardian or conservator appointed.
Springing Power of Attorney
A Springing Power of Attorney, on the other hand, becomes effective only in the event you have been declared mentally incapacitated. So, your Attorney-in-Fact has the power to manage your investments, pay your bills, access your financial accounts, and do anything he or she would do under a Durable Power of Attorney, except he or she only gets those powers when you can no longer manage your own affairs.
Once you pass away, regardless of the type of Power of Attorney you have, the powers of your Attorney-in-Fact will terminate and the terms of your will or trust determine how your property is distributed.
For help with establishing your Power of Attorney documents, we invite you in for a free consultation – (336) 547-9999.