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What does it mean to set up a durable power of attorney?

Two legal terms that we hear a lot are "power of attorney" and "durable power of attorney," but what is the difference between the two?

A normal power of attorney is a special legal document that gives another person the power to act and make decisions on your behalf. The individual that you provide power of attorney status to is referred to as your "attorney-in-fact." However, the designated person does not actually need to be an attorney. This individual will be able to speak on your behalf and make financial and medical decisions on your behalf. He or she will also be able to sign contracts, checks and other documents for you.

A power of attorney document can be tailored to your specific needs, and you can provide limited or broad powers to your attorney-in-fact depending on what your situation requires. Perhaps you want to sell your home in a different state, but you do not want to travel there to sell it. You can provide someone with power of attorney to make the transaction on your behalf.

With a normal power of attorney, the powers end once the purposes of the relationship have been completed. However, with a durable power of attorney, it continues, even in the event you are incapacitated. For this reason, durable powers of attorney are vital tools in the estate planning process. Indeed, without a durable power of attorney on file, in the event of incapacitation, your family may need to go through a more complicated legal process in order to get the power to make decisions on your behalf.

Source: 360 Degrees of Financial Literacy, "What is the difference between a power of attorney and a durable power of attorney?," accessed May. 27, 2015

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