Quick answer: A power of attorney gives another person authority to act for you. A durable power of attorney is designed so that the authority can continue even if you later become disabled or incapacitated.
That difference can matter enormously.
A will answers:
“Who receives my property after I die?”
A durable power of attorney addresses a different problem:
“Who can manage my financial and property matters while I am still alive if I cannot handle them myself?”
For many families, incapacity planning is just as important as death planning.
What Is a Power of Attorney?
A power of attorney is a document in which one person, called the principal, gives another person, called the agent, authority to act on the principal’s behalf.
The authority can be broad or narrow.
Depending on the document, an agent may be authorized to handle matters involving:
- bank accounts;
- bills;
- investments;
- real estate;
- taxes;
- insurance;
- business interests;
- government benefits;
- contracts and other financial matters.
The document does not automatically give the agent unlimited authority.
The agent receives only the authority granted by the document and applicable law.
What Makes a Power of Attorney “Durable”?
The word durable refers to what happens if the principal later becomes disabled or incapacitated.
Texas Estates Code Chapter 751 governs durable powers of attorney, while Chapter 752 contains Texas’s statutory durable power-of-attorney provisions.
A properly prepared durable power of attorney can allow the agent’s authority to continue after the principal becomes incapacitated.
That is why durable powers of attorney are so commonly used in estate planning.
Without durability, a power of attorney may fail at precisely the time the family expected to rely on it.
Why Does That Matter?
Imagine a 78-year-old widow who handles all of her own finances.
She suffers a serious stroke and can no longer manage her bank accounts, insurance, taxes, or property.
Her daughter is ready and willing to help.
But willingness is not the same thing as legal authority.
The bank may not simply allow the daughter to take over because she is the child.
A properly prepared durable power of attorney may give the daughter the legal authority to act without first asking a court to appoint a guardian.
That can make the difference between an organized transition and a legal crisis.
What Can a Durable Power of Attorney Cover?
A Texas durable power of attorney can address a wide range of financial and property matters.
Depending on the authority granted, an agent may be able to:
- pay bills;
- manage bank accounts;
- handle investments;
- deal with real estate;
- manage business interests;
- file tax returns;
- handle insurance matters;
- deal with retirement benefits;
- manage personal and family maintenance expenses;
- communicate with financial institutions.
Some powers require particular attention and should not be assumed merely because a document is broad.
The document should be drafted around the principal’s actual needs.
A Durable Power of Attorney Is Not a Medical Power of Attorney
These are separate documents with different jobs.
A Durable Power of Attorney generally concerns financial and property matters.
A Medical Power of Attorney concerns health-care decisions.
One does not replace the other.
A complete incapacity plan often includes both.
What About a “Springing” Power of Attorney?
A durable power of attorney can also raise another question:
When should the agent’s authority begin?
Some powers of attorney are effective immediately.
Others are designed to become effective only after a future event, such as a determination of incapacity.
That type of arrangement is commonly called a springing power of attorney.
There are advantages and disadvantages to both approaches, and we already have a separate article in the queue dealing specifically with springing powers of attorney.
For this article, the important point is that durability and timing are different questions.
A power of attorney can be durable and still be either immediately effective or conditioned on a future event.
Why Immediate Authority Can Be Useful
Some people are uncomfortable giving an agent immediate authority.
That concern is understandable.
But immediate authority can also make the document easier to use.
For example, an older parent may want an adult child to help with:
- banking;
- insurance;
- property management;
- tax matters;
- routine financial administration.
If the power is already effective, the child may be able to help without first proving that the parent has become incapacitated.
The tradeoff is that the agent has authority before incapacity occurs.
That makes agent selection extremely important.
Why Agent Selection Matters
A durable power of attorney can give another person substantial authority over your finances.
Choose an agent who is:
- trustworthy;
- financially responsible;
- organized;
- dependable;
- able to keep records;
- willing to act;
- capable of putting your interests ahead of his or her own.
Texas law imposes fiduciary duties on agents acting under durable powers of attorney.
The document may be excellent.
But if the wrong person is appointed, the planning can still fail.
You Can Name Successor Agents
The first person you name may someday be unable or unwilling to serve.
Texas law permits successor agents under a durable power of attorney.
That allows the plan to provide a backup rather than forcing the family to start over if the first choice cannot act.
For many clients, naming at least one appropriate successor is sensible.
A Power of Attorney Does Not Last Forever
A durable power of attorney is powerful, but it is not permanent.
Texas law provides circumstances under which a durable power of attorney terminates, and the agent’s authority can also terminate in specified situations.
Most importantly, a power of attorney ends at the principal’s death.
After death, authority generally shifts to the executor, administrator, trustee, or other person legally responsible for the estate or property.
The agent does not simply continue acting because he or she had power of attorney during life.
Real Estate May Require Extra Attention
If an agent is going to sign certain documents involving real property, recording requirements can become important.
Texas law specifically addresses recording a durable power of attorney for real-property transactions requiring execution and delivery of an instrument that is itself recorded.
That is another reason not to assume that a generic form downloaded years ago will necessarily work smoothly for every transaction.
Financial Institutions May Scrutinize the Document
Even a valid durable power of attorney may receive careful review from a bank, title company, brokerage, or other institution.
They may examine:
- whether the power is still effective;
- whether the requested transaction is authorized;
- whether the agent’s identity is established;
- whether required certifications or records are available;
- whether the document satisfies applicable law.
That does not mean the power of attorney is useless.
It means the document should be carefully prepared, current, and suited to the transactions the agent may need to handle.
Why Waiting Until Incapacity Is Dangerous
A person must have sufficient legal capacity to execute estate-planning documents.
Once serious dementia, cognitive decline, stroke, or other incapacity has progressed far enough, it may no longer be possible to create a valid power of attorney.
At that point, the family may have fewer options.
A court-supervised guardianship may become necessary in some situations if no one has sufficient legal authority to act.
That is why powers of attorney are planning documents—not crisis documents.
A Durable Power of Attorney Is Part of a Larger Incapacity Plan
A good incapacity plan may include:
- Durable Power of Attorney;
- Medical Power of Attorney;
- HIPAA authorization;
- Directive to Physicians;
- appropriate trust planning;
- clear information about accounts, property, insurance, and advisers.
The goal is not simply to sign forms.
It is to make sure the people you trust can actually step in when needed.
A Simple Example
John is 72.
He has a checking account, investment accounts, rental property, insurance, and a home.
His daughter Susan helps him occasionally, but John still manages everything himself.
Several years later, John develops dementia.
If John already has a properly prepared durable power of attorney naming Susan, she may be able to begin handling the financial matters John can no longer manage.
If there is no effective authority in place, Susan may discover that being John’s daughter does not give her the legal power to manage his property.
That is when families sometimes find themselves considering guardianship.
The Better Question
Do not ask only:
“Do I have a power of attorney?”
Ask:
“Will the authority I have created still work when my family actually needs it?”
That is the planning question that matters.
Ready to Review Your Incapacity Plan?
If you are not sure whether your current power of attorney is durable, current, broad enough, or coordinated with the rest of your estate plan, it may be worth reviewing before a health crisis occurs.
A consultation can help determine who should serve, what authority should be granted, when the authority should begin, and how the document fits with your medical and estate-planning documents.
If you would rather begin by organizing your information, the Texas Probate Risk Workbook can help identify issues your family may someday need to address.