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We received a letter from a doctor indicating that a customer no longer has sufficient mental capacity to make financial decisions. The customer has a short form power of attorney. Does this become a durable power of attorney by default, or is it no longer effective due to the customer’s mental condition? – IBA Compliance Connection

IBA Compliance Connection

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We received a letter from a doctor indicating that a customer no longer has sufficient mental capacity to make financial decisions. The customer has a short form power of attorney. Does this become a durable power of attorney by default, or is it no longer effective due to the customer’s mental condition?

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Whether a power of attorney document survives the principal’s incapacity depends on the wording of the document itself. If the power of attorney document does not state otherwise, it will be treated as durable — meaning that it will continue “until the death of the principal, notwithstanding . . . the principal’s disability or incapacity.” However, it is possible that the customer’s power of attorney document does state an earlier termination date, and we recommend reviewing the document to confirm that it survives the principal’s incapacity.

For resources related to our guidance, please see:

  • Illinois Power of Attorney Act, 755 ILCS 45/2-5 (“Unless the agency states an earlier termination date, the agency continues until the death of the principal, notwithstanding any lapse of time, the principal’s disability or incapacity or appointment of a guardian for the principal after the agency is signed.”)