Durable Power of Attorney for Finances: How It Works

A financial power of attorney does double duty: it protects you, and it spares your family a lot of grief. If you become unable to manage your own affairs and you never set one up, your spouse, closest relative, or partner will likely have to go to court just to get authority over your money.

There are other kinds of powers of attorney worth knowing about too, depending on what you're planning for.

This guide was updated by Jeff Burtka, an attorney affiliated with George Mason University Law School.

In this article

• What counts as a financial power of attorney
• When a financial power of attorney kicks in
• What your agent is allowed to do
• Steps to set one up
• When it stops working
• Keeping banks from turning it away
• Where to learn more

What counts as a financial power of attorney

A durable financial power of attorney is a straightforward, low-cost, dependable way to put someone in charge of your money if you're ever unable to make decisions yourself.

When a financial power of attorney kicks in

Your durable power of attorney stops working the moment you die.

You can write the document so it's active the day you sign it. Many married couples set this up for each other, in case one of them is hurt, ill, or simply traveling. Make sure the paperwork calls the document \"durable\" — otherwise, in a lot of states, it stops working automatically the moment you actually lose capacity, which defeats the whole purpose.

You can instead choose to have it stay dormant until a doctor confirms you've become incapacitated. This version is called a \"springing\" durable power of attorney. It lets you hold onto full control until you truly need help, at which point the document activates. The tradeoff: springing versions often create delays and headaches for the agent trying to use them.

What your agent is allowed to do

Signing a durable power of attorney hands someone else legal authority to act for you. That person is your agent — some states call this role \"attorney-in-fact.\"

Most people grant broad authority over all their finances, but you decide how wide or narrow to make it. Depending on what you choose, your agent might be able to:

• cover everyday costs for you and your family using your money
• buy or sell real estate and other property, keep it maintained, pay the taxes on it, or take out a mortgage against it
• collect government benefits like Social Security or Medicare on your behalf
• put your money into investments such as stocks, bonds, or mutual funds
• conduct business with your bank or other financial institutions
• purchase or cancel insurance policies and annuities in your name
• prepare and pay your taxes
• keep your small business running
• accept property that comes to you through inheritance or other entitlement
• move assets into a trust you set up beforehand
• retain a lawyer to represent you in legal proceedings, and
• oversee your retirement accounts.

Whatever powers you grant, your agent has a duty to act in your interest, keep clear records, keep your assets separate from their own, and steer clear of conflicts of interest.

Steps to set one up

Making a valid durable power of attorney usually just means filling out and signing a short, fill-in-the-blank form — nothing complicated. Some states offer their own official version, but you're not required to use it.

Some banks and brokerages insist on their own power-of-attorney paperwork. If you want your agent to move smoothly through these institutions, you may need to sign more than one document: your general one, plus whatever form each institution requires. More on that below.

Your signature has to happen in front of a notary. Some states also require witnesses to watch you sign. If your agent needs authority over your real estate, record a copy of the document at the county land-records office covering that property. (South Carolina actually requires this recording step for the document to count as durable at all.)

When it stops working

Your durable power of attorney automatically ends the moment you die. It can't authorize your agent to handle anything afterward — not paying off debts, not arranging your funeral or burial, not distributing property to your heirs. If you want someone to have authority to wrap up your affairs after death, name them as executor in your will instead.

Beyond death, your power of attorney also ends if:

• You cancel it. You can cancel your durable power of attorney at any point, provided you're still mentally competent.
• You divorce. If your spouse was your agent, many states automatically cut off their authority once you divorce. Others require you to formally revoke the old document. Either way, it's smart to draft a fresh one as soon as divorce papers are filed.
• A court throws it out. This rarely happens, but a judge can invalidate the document if there's evidence you weren't mentally competent when you signed it, or that someone pressured or defrauded you into it.
• No agent is left to act. Naming a backup agent in the document avoids this gap.

Keeping banks from turning it away

You'd think a valid financial power of attorney would be accepted anywhere without question. In practice, some banks push back on perfectly legitimate documents, or slow-walk the process for your agent. Many states legally bar banks from rejecting a properly executed power of attorney — but that doesn't always stop them from trying.

Reaching out to your bank and other financial institutions ahead of time can head off delays later. For the specific steps that help, see Can Banks Refuse a Power of Attorney?

Where to learn more

The rules covering powers of attorney vary from state to state, so it's worth double-checking your state's specific requirements — or talking with an estate planning attorney — before you sign anything.