A durable financial power of attorney (POA) authorizes an agent to act on the principal's behalf and, by being durable, survives the principal's incapacity — the entire point of the instrument for planning. Under the Uniform Power of Attorney Act (UPOAA), a POA is presumed durable unless it states otherwise, reversing the common-law default.
A durable POA is effective on execution and continues through incapacity. A springing POA takes effect only upon a defined triggering event (usually incapacity). Springing powers create a proof problem — the agent must establish the trigger before acting, delaying access exactly when speed matters. Most practitioners favor an immediately effective durable POA held in escrow or delivered on trust, reserving springing structures for clients with specific concerns.
Under the UPOAA, certain authorities that can dissipate the estate or alter the estate plan are not included in a general grant and must be expressly conferred, often with specific initialing. These 'hot powers' include:
- Making gifts (and the annual-exclusion or larger limits on them).
- Creating, amending, revoking, or terminating an inter vivos trust.
- Creating or changing rights of survivorship and beneficiary designations.
- Delegating authority, waiving retirement-plan survivor benefits, and disclaiming property.
Gifting authority and the estate plan
Unlimited gifting authority is a fraud and estate-depletion risk; unclear authority blocks legitimate incapacity tax planning. Calibrate gift authority to the plan (e.g., limited to annual exclusion, or broader for a client with a taxable estate) and consider requiring gifts to follow the principal's existing estate plan.
Key takeaways
- Under the UPOAA a POA is durable by default; hot powers must be granted expressly.
- Immediately effective durable POAs avoid the springing-trigger proof delay.
- Calibrate gifting and trust-amendment authority to the client's estate and tax plan.
- Third-party acceptance is the practical battleground — refresh documents and use institution forms for key accounts.
Authorities
- Uniform Power of Attorney Act (2006, amended) — Durability default, hot powers, acceptance rules.
- IRC 2041 / 2514 — General power of appointment consequences relevant to agent gifting.