What Is a Durable Power of Attorney for Finances?

A durable power of attorney for finances is a legal document that allows you to appoint a trusted person to manage your financial affairs if you become unable to do so. This safety net ensures that if you ever become incapacitated, your loved ones can pay your bills, file your taxes, maintain your home, and handle other tasks that you specify.

Durable Power of Attorney vs. Financial Power of Attorney: What’s the Difference?

A durable power of attorney for finances is sometimes called a financial power of attorney or simply a POA. However, it's the word "durable" that allows the power of attorney to remain in effect if you become incapacitated. A financial power of attorney that isn't durable will end if you are no longer able to manage your own finances.

The person you name to handle your finances is called your attorney-in-fact or, in some states, your agent. In addition to naming your attorney-in-fact, when you make your durable power of attorney for finances, you can:

• appoint an alternate attorney-in-fact in case your first choice becomes unable to serve, and
• state precisely how much authority you want your attorney-in-fact to have over your financial matters.

Terms to Know When Making a Financial Power of Attorney

Here are some key terms that will recur frequently in your POA. It's helpful to understand them from the beginning.

Principal. The principal is the person who creates and signs the power of attorney document. When you make a durable power of attorney for finances naming an attorney-in-fact, you're the principal.

Attorney-in-Fact (Agent). The attorney-in-fact is the person authorized to act on behalf of the principal. In many states, the attorney-in-fact is called the agent of the principal. Some states use the two terms interchangeably.

Alternate Attorney-in-Fact (Alternate Agent). The alternate attorney-in-fact is the person who takes over as attorney-in-fact if your first choice cannot or will not serve. Some states may refer to this person as the successor attorney-in-fact or successor agent.

Durable Power of Attorney. A durable power of attorney is a power of attorney (POA) that remains in effect after the principal becomes incapacitated. A durable power of attorney differs from a general power of attorney, which terminates if the principal is no longer capable of handling their own finances.

Incapacitated. A person who is incapacitated is unable to handle their own financial matters or health care decisions. Some states call this disabled or incompetent. Typically, a doctor decides whether a person is incapacitated.

What Personal Information Must You Share to Make a Financial Power of Attorney?

To make a durable power of attorney for finances, you need to share some basic personal information about yourself, usually just your name and address. You don't need to include your Social Security number or details about your financial accounts; you'll share those with your attorney-in-fact outside of the power of attorney document.

Your name: Which version should you use in your POA?

Use the name that appears on formal business documents, such as your driver's license, bank accounts, or real estate deeds. This name may not be the one that appears on your birth certificate. If you have used different names in important documents, you can list all of them in your document. Be sure to enter all names in which you hold bank accounts, stocks, bonds, real estate, and other property. Your attorney-in-fact's job will be easier if your POA includes all needed versions of your name.

If you use more than one name and don't mind extra work, consider settling on one name for your POA document, and then changing your other documents to conform. That will clean up your records and save your attorney-in-fact some trouble later on. To change your name on official documents and records—for example, bank accounts, deeds, or Social Security records—you'll have to contact the appropriate government office or financial institution to find out what documentation they'll need.

Your address: What should you do if you have more than one?

For most people, the answer to this question is obvious. You should use the complete address of your residence. However, if you spend considerable time in more than one state during the year, you must decide which residence to use. Choose the address in the state where you vote, register vehicles, own valuable property, have bank accounts, or run a business. If you've already made other estate planning documents, be consistent: Use the same address for every document.

Your Social Security number: Does it belong in your POA?

Your attorney-in-fact should know your Social Security number. It will be essential to obtain your financial information and manage your affairs. That doesn't mean it's wise to put this information in your financial power of attorney document. Concerns about identity theft make it essential for you to protect this sensitive piece of information. Some states even prohibit the use of Social Security numbers in public records documents. Instead, write the number down and ask your attorney-in-fact to keep it safe.

More Information About Durable Powers of Attorney for Finances

To learn more about durable financial powers of attorney, see the following articles:

• When Does a Durable Power of Attorney Take Effect?
• What Powers Can a Financial Power of Attorney Include?
• When Does a Power of Attorney End?

You can learn more about making WillMaker’s durable power of attorney for finances in WillMaker’s Legal Manual.