The power may be quite limited: for example, permitting the agent only to make deposits to the principal's bank account. The power can also be broad, authorizing the agent to engage in nearly any transaction that the principal could.

A Power of Attorney is also limited in its duration. It can be expressly limited in time. For example, the agent may be given a power of attorney that terminates when a specific act is completed. Even if no duration is specified, a conventional -- or common-law -- power of attorney becomes inoperative upon the incapacity of the principal. To extend the power beyond the incapacity of the principal, the power must be made expressly durable.

A Durable Power of Attorney takes effect immediately when the document is executed even though it may not be needed until much later, if ever. Some individuals, however, are reluctant to grant an agent broad powers to act at a time when the principal is capable of acting.

These people would prefer to use a "springing" durable power of attorney. Recognized in many states, a springing power lies dormant and ineffective until a designated time, such as the principal's incapacity.

A Durable Power of Attorney should be used whenever an individual feels he or she will need someone to make important financial and/or personal decisions after the individual loses capacity. Most individuals will have assets or personal affairs that must be managed should they lose capacity.

If the individual has a complex estate plan, the durable power is essential. A wealthy individual who has begun his or her estate plan by making lifetime gifts or charitable donations will need someone to have the power to continue making such gifts or donations after the donor loses capacity. It would often be devastating to the individual's estate plan if the gifts could no longer be made.

For example, suppose the individual makes regular contributions to an irrevocable life insurance trust. A durable power must be in effect for the premiums to be paid from the principal's funds after the principal loses capacity.

Otherwise, the principal's family might have to pay the premiums from their own funds for the rest of the principal's life. This, of course, would be counterproductive to the principal's estate plan.

All states authorize the health care power of attorney, also known as an Advanced Healthcare Directive. This durable power permits the agent to make health care decisions for the principal if the principal loses capacity. Many individuals prefer the health care power of attorney to a living will; some use the health care power in conjunction with a living will.

One of the primary uses of a durable power is the delegation to an agent of the management and control of the principal's financial affairs during his or her incapacity. The following is a sample of the types of property management powers that might be considered for a power of attorney:

• To make deposits and withdrawals from bank accounts
• To sign tax returns and appoint qualified individuals to represent the principal with the IRS to make investment decisions
• To deal with retirement plans, including IRAs
• To have access to the principal's safe-deposit box
• To create a living trust and fund a previously created living trust to revoke or change beneficiary designations
• To vote the principal's stock
• to forgive or collect the principal's debts
• To enter into contracts on behalf of the principal to make gifts on behalf of the principal
• To disclaim gifts or bequests made to the principal
• To deal with life insurance on the life of the principal

• What is an Advanced Healthcare Directive?