A power of attorney is a written instrument in which one person appoints another person to act on his or her behalf with respect to property and personal care. The problem with a non-durable power of attorney is that it is terminated if the principal granting the power loses the capacity to enter a contract. Therefore, the power is terminated when the person needs assistance the most. A durable power of attorney is a power of attorney in which the agency relationship continues despite the loss of capacity.
If a person with a living trust becomes incapacitated, their successor trustee will generally take over the management of all trust assets. However, the successor trustee may only manage the assets that are in the trust, and does not have the power to manage other personal assets or conduct various personal tasks. An agent operating under a durable power of attorney has the power to sign tax returns, file for state or federal benefits, and bring or defend a lawsuit on behalf of the principal.
The durable power of attorney instrument can be very flexible, granting certain limited powers and taking effect only when a person is determined to be incompetent by two licensed physicians. For example, a durable power of attorney can grant a person only the power to transfer all existing personal assets into the trust and to sign personal tax returns.
Having a durable power of attorney confers a lot of power on the agent, and while there are many benefits, it should be drafted carefully to minimize the potential for abuse. As always, please consult with a licensed attorney regarding your particular circumstances.