When Does a Durable Power of Attorney Take Effect?

Most durable powers of attorney take effect immediately after they are signed, notarized, and, in some states, witnessed. In contrast, others take effect only after the person making the power of attorney becomes incapacitated.

Making a Power of Attorney (POA) Effective Immediately

By default, a power of attorney (POA) takes effect right away. As soon as you sign and properly finalize the document, your attorney-in-fact (called your agent in some states) can act on your behalf.

If you need someone to help you keep an eye on your finances, you may want your attorney-in-fact to start acting for you immediately. On the other hand, you may prefer that your attorney-in-fact use the document only if you are unable to handle matters yourself, either because you are temporarily ill or injured or because of long-term incapacity. There are two ways to ensure your attorney-in-fact won't use your power of attorney until you are incapacitated.

Tell Your Attorney-in-Fact How to Use Your POA

If you want your attorney-in-fact to use the power of attorney only if you are unable to take care of your finances, clearly convey those wishes to the person you name. If you don't trust that your attorney-in-fact will refrain from using the document unless and until you are incapacitated, strongly consider naming someone else to do the job.

Make a Springing Power of Attorney

You may have heard of "springing" powers of attorney—that is, powers of attorney that "spring" into effect when you become incapacitated. Many people like the idea of these documents, because they prefer not to make their power of attorney effective while they can still manage their affairs. Unfortunately, in practice, using a springing power of attorney often causes more problems than it solves. For example:

• Delay. Instead of being able to use the power of attorney as soon as the need arises, the agent must prove your incapacity before using the document. In other words, someone—usually a doctor—must certify that you can no longer make your own decisions. Obtaining this certification could take days or weeks and disrupt the handling of your finances.
• HIPAA/Privacy issues. State and federal laws, including the Health Insurance Portability and Accountability Act (HIPAA), protect your right to keep medical information private. Doctors can release information about your medical condition only under limited conditions. To certify your incapacity, your attorney-in-fact will need to prove that the doctor may legally release information about you to your attorney-in-fact. You may be able to resolve this issue by completing a release form before you become incapacitated. However, your agent could still encounter problems caused by bureaucracy or the doctor's confusion about what is legally required. Navigating these issues could cause severe headaches and delays for your agent.
• Definition of incapacity. A springing power of attorney must define incapacity. Then, when it comes time for the determination, your doctor will have to agree that you meet that definition. But how do you know now what health changes will cause you to need help managing your finances? What if you want help before you become incapacitated, as defined by your document? What if you have some good days and some bad days? What if your agent or your lawyer believes you no longer have capacity, but your doctor disagrees? These gray areas may make it difficult for your agent to help you when you need it.

You can avoid these problems by creating a durable power of attorney that takes effect when you sign it. Just make sure your attorney-in-fact understands exactly when and how you want them to use the document. This level of trust is a fundamental requirement for appointing an agent. Again, suppose you don't trust your agent to handle the power of attorney exactly as you intend. In that case, you should choose someone else to handle your finances.

If you still feel that you need a springing power, consider consulting a lawyer for assistance. An experienced lawyer can draft a power of attorney closely tailored to your specific situation and concerns.

When Does a Power of Attorney End?

Unless you make your power of attorney durable, it will end as soon as you become incapacitated and unable to manage your finances. A durable power of attorney, on the other hand, lasts until your death. You can also end a power of attorney at any time by revoking it; you can revoke a durable power of attorney as long as you have the mental capacity to do so.

What If You Don't Have a Durable Power of Attorney?

If you don't have a durable power of attorney and you become incapacitated, your family or others close to you can't just handle your financial affairs without permission—for example, by signing on to your online accounts. Even if they're acting responsibly, they would run the risk of landing in legal hot water.

Instead, your loved ones must ask a judge to name someone to manage your financial affairs. Depending on your state, this person may be called a conservator, guardian of the estate, committee, or curator. We use the term conservator because it's the most commonly known. The next section contrasts conservatorships with durable powers of attorney, underscoring why it's worth your time to prepare a durable attorney now.

Conservatorship vs. Durable Power of Attorney

Conservatorships and durable powers of attorney for finances achieve the same goal: Each names someone to manage your finances if you can't do so yourself. However, the first involves a court proceeding, while the second is something you can do for yourself.

What Is a Conservatorship?

A conservatorship is a court proceeding in which a judge appoints a person (called the conservator) to manage the finances of another person. It's generally a good idea to avoid a financial conservatorship because the court process can be expensive and uncomfortable.

The appointment of a conservator is usually just the beginning of court proceedings. Often, the conservator must:

• post a bond—a kind of insurance policy that pays if the conservator steals or misuses property
• prepare detailed financial reports—or hire a lawyer or accountant to prepare them and periodically file them with the court, and
• get court approval for certain transactions, such as selling real estate or making slightly risky investments.

All of this, of course, costs money—your money. However, in certain circumstances, conservatorships can be beneficial—or even unavoidable.

A conservatorship isn't necessarily permanent, but it may be ended only by the court.

Avoid Conservatorships With a Power of Attorney

Conservatorship proceedings can be complicated, expensive, and even embarrassing. Your loved ones must ask a court to rule that you cannot take care of your own affairs—a public airing of a very private matter. Court proceedings are matters of public record; in some places, a newspaper must publish a notice. If relatives fight over who is to be the conservator, the proceedings will surely become even more disagreeable. And all of this causes costs to mount up, especially if feuding parties must hire lawyers.

If a judge appoints a conservator, there is no guarantee that the person who gets the job will be the person you would have chosen. A judge may ask you to express a preference for conservator—and will strongly consider what you say—but even this will not ensure your choice prevails.

You can most likely avoid the troubles of a conservatorship if you take the time to create a durable power of attorney for finances while you can. When you make a durable power of attorney, you give your attorney-in-fact full legal authority to handle your financial affairs. A financial conservatorship proceeding would be necessary only if no one were willing to serve as attorney-in-fact, if the attorney-in-fact wanted guidance from a court, or if a close relative thought the attorney-in-fact wasn't acting in your best interests.

Nominate a Conservator in Your Power of Attorney

If you make a durable power of attorney and a court must appoint a conservator later, your power of attorney can nominate your attorney-in-fact (or an alternate) as conservator. The court will follow your recommendation unless there is a compelling reason not to do so—for example, if someone has proved that your attorney-in-fact is mishandling your money. (Again, this type of challenge is rare.)

Without a durable power of attorney nominating a conservator, state law generally provides a priority list for who should be appointed. For example, several states designate the person's spouse or registered domestic partner as the first choice for conservator, followed by an adult child, parent, and brother or sister. In many states, the law allows the court to appoint whomever it determines will act in your best interests.

If you don't nominate your attorney-in-fact to serve as the guardian or conservator of your estate, your power of attorney document won't mention the issue at all. The court will name someone using the guidelines above.

When Court Supervision May Be Required

A court does not directly supervise an attorney-in-fact; that's the whole point of naming one. The attorney-in-fact is not required to file reports with any courts or government agencies.

However, as mentioned above, a court may become involved if someone close to you fears that the attorney-in-fact is acting dishonestly or not in your best interests. It's rare, but close relatives or friends may ask a court to order the attorney-in-fact to take certain actions. Or they may ask the court to terminate the power of attorney and appoint a conservator to look after your affairs. If a conservator is appointed for you, the attorney-in-fact will have to account to the conservator, or the conservator may revoke your durable power of attorney altogether. As described above, you can use your durable power of attorney for finances to nominate your attorney-in-fact as your first choice for conservator.

Some states have statutes that set out specific procedures for such court actions. For example, a California statute authorizes any interested person, including relatives and friends of the principal, to ask a court to resolve questions relating to the durable power of attorney. Tennessee law provides that the next of kin can petition a court to require an attorney-in-fact to post a bond—something like an insurance policy, generally issued by a surety company.

Even if your state does not have a statute specifically authorizing court actions, someone interested in your welfare and upset with the attorney-in-fact could still go to court and ask for a conservator to be appointed.

When Not to Use a Durable Power of Attorney

A durable power of attorney is not the right solution for every problem. In some cases, you need a different form. In other cases, a conservatorship might be a better idea. Do not use a durable power of attorney for finances in these situations:

• If you can't think of someone you trust enough to appoint as your attorney-in-fact. In this case, a conservatorship, with the safeguard of court supervision, may be worth the extra cost and trouble.
• If you anticipate family fights. If you expect that family members will challenge your document or cause continual trouble for your attorney-in-fact, a conservatorship may be preferable. Your relatives may still fight, but at least the court will be there to keep an eye on your welfare and your property. If family discord is a concern, hire an attorney to help you decide if a durable power of attorney is the right choice for you.
• To authorize health care decisions. A durable power of attorney for finances does not give your attorney-in-fact legal authority to make health care decisions for you. To make sure that your wishes for health care are known and followed, create a health care directive.
• To authorize decisions about marriage, adoption, voting, or wills. You cannot authorize your attorney-in-fact to marry, adopt, vote in public elections, or make a will on your behalf. These acts are considered too personal to delegate to someone else.
• To give powers delegated to others. If you've already given someone legal authority to manage some or all of your property, you cannot delegate that authority to your attorney-in-fact. For example, you cannot use your durable power of attorney to give your attorney-in-fact the authority to manage your interest in a partnership business if you have a signed agreement giving that authority to your partners. Likewise, you can't give your attorney-in-fact the power to manage the property in a living trust unless you've named your attorney-in-fact as your successor trustee.

More Information About Durable Powers of Attorney for Finances

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

• What Is a Durable Power of Attorney for Finances?
• What Powers Can a Financial Power of Attorney Include?
• Choosing an Attorney-in-Fact

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