Estate Planning Law

What Are the Differences Between Durable Power of Attorney, Power of Attorney, and Health Care Directives?

Three of the most common documents that appear in estate plans are a power of attorney, a durable power of attorney, and a health care directive. Each of these estate planning documents has different legal requirements, making it important for people to understand what they mean before signing off on any documents.

Low-cost do-it-yourself (D.I.Y.) powers of attorney are possible in some simple cases and can be found on our companion site, Estate law varies from state to state, and estate planning situations can get complicated quickly. You may also want to consult with an estate planning attorney in your area for advice on your individual situation.

About Power of Attorney

In simple terms, a power of attorney allows a person to grant another person the power to make decisions on one's behalf. This type of power of attorney can be used for general purposes or for a specific purpose.

Many people implement a power of attorney when they need someone to handle something specific, such as negotiating a contract. In most cases, people can choose anyone to act on their behalf, and the power of attorney designation can be canceled at any time by either party. This type of power of attorney may also contain a clause specifying when and under what conditions a limited power of attorney will end.

About Durable Power of Attorney

While similar, a durable power of attorney is different because it is a much more formal estate planning document. Most of the time, a durable power of attorney is in case you become ill or incapacitated and can no longer manage your own finances.

As it is sometimes impossible to know when this might occur, many people choose to put the document in place before any sign of illness begins.

The major difference between a regular and a durable power of attorney is language. For a durable power of attorney to be valid, it must explicitly state that it will go into effect when or if the subject becomes incapacitated in some way. Some states may require an accompanying document called a self-proving affidavit. Should you become incapacitated without a plan in place, the courts may appoint a guardian or conservator to make important decisions on your behalf.

How Health Care Directives Differ

In almost all cases, a power of attorney does not give someone the authority to make health care decisions for you. Instead, advanced health care directives, also known as appointing a health care proxy, perform this kind of function.

Essentially, health care directives empower a trusted person to make medical decisions on your behalf. The document does not cover financial decisions, which is why this legal tool is different from a power of attorney. Some states will allow the subject's physician to act as a health care proxy, while other states believe this represents a conflict of interest and will not allow the practice.

These designations show why everyone can benefit from estate planning, no matter the size of your estate. For example, one person might have a massive portfolio of valuable investments, and another might only have a modest bank account. Yet both of these individuals will benefit from advance directives regarding how to handle their assets if death or serious illness arises.