What is a Durable Power of Attorney?
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What is a Durable Power of Attorney?

| Jan 29, 2017 | Uncategorized |

A power of attorney is a document whereby one individual, referred to as a “principal,” authorizes another individual, referred to as an “agent” or “attorney in fact,” to act on behalf of the principal. In most cases, the agent must act in the best interest of the principal, but an agent is given substantial power.

Powers of attorney can either be general or specific (sometimes called a limited power of attorney), and can either be durable, non-durable, or springing. These types can be combined in any way such as by having a general durable power of attorney (a common type of power of attorney) or a springing specific power of attorney.

General Power of Attorney

A general power of attorney is a power of attorney that gives the agent broad powers over the principal’s assets. The power of attorney often lists specific powers that the agent possesses, but also has a generic catch-all provision that covers almost all actions that the principal could take. Even with such a broad general power of attorney, there are certain restrictions that limits an agent’s ability to make gifts on behalf of the principal.

Specific Power of Attorney

A specific power of attorney is a document whereby the principal gives only certain powers to the agent. These are not very common for estate planning purposes, but are often used in real estate transactions whereby one spouse will authorize the other to sign the real estate deed so that only one spouse is required to attend the closing.

Durable Power of Attorney and Non-Durable Power of Attorney

Whether a power of attorney is durable or non-durable addresses the effect of the power of attorney when the principal becomes incapacitated. An agent’s authority under a non-durable power of attorney is terminated when the principal becomes incapacitated. Conversely, a durable power of attorney allows the agent to continue to exercise the authority granted him or her by the principal once the principal has become incapacitated. Because powers of attorney are often executed in order to allow the principal to avoid the necessity of a guardianship or conservatorship proceeding upon the principal becoming incapacitated, in most cases, durable powers of attorney are used in estate planning.

Springing Powers of Attorney

Springing powers of attorney are those powers of attorney that become active only upon the principal becoming incapacitated. They are not as common as durable (or even non-durable) powers of attorney.

Conservator/Guardian vs. Power of Attorney

When an individual becomes incapacitated, they no longer have the ability to take action on their own behalf (or their ability may be impaired to a lesser extent, which is known as “diminished capacity”). When incapacity or diminished capacity occurs, someone is needed to step in and take action on the individual’s behalf. If the individual has executed a general durable power of attorney, the person who steps in and takes action on the individual’s behalf is the agent who was appointed under the power of attorney.

If the incapacitated individual has not executed a proper power of attorney, the courts step in (in South Carolina, the probate court) to appoint a guardian and conservator for the individual. Often-times, the guardian and conservator are the same person. A guardian is someone appointed to look after the individual’s physical well-being and a conservator is someone appointed to look after the individual’s economic interests. Because of the costs (both in money and time) of having a guardian and conservator appointed, it is advisable to avoid this process if possible by having a power of attorney in place. In addition, having a durable power of attorney avoids the stress on the incapacitated individual of having their mental state examined publicly in court.