What would happen to your finances if you were temporarily incapacitated by illness or injury? Most financial planners recommend having sufficient savings to fund up to six months of your living expenses ... but who would pay your bills? And how? If you did not explicitly give someone authority to handle your affairs and the power to manage your finances, even your spouse may not be able to take care of essentials without asking a court for permission to do so. As you might imagine, this is a time-consuming, awkward approach -- and fortunately one that is completely avoidable.

You can solve these problems with a durable power of attorney. This valuable document lets you transfer legal authority to another person to handle your personal affairs, from signing your checks to preparing tax returns and making retirement elections. (Of course, this is a very powerful document, so you should be certain that you have absolute trust in the person to whom you delegate this authority.) By making the power of attorney 'durable,' you ensure that it will endure even if you are incapacitated. You may revoke this power if you later change your mind and want to designate someone else.

The typical power of attorney takes effect when it is executed. However, many states permit a 'springing' power of attorney that goes into effect only when a specified event (such as incapacity) occurs. The time for executing a durable power of attorney is now, since no one knows when incapacity or disability may occur. Durable power of attorney forms are often available in legal self-help publications. Often, banks or other financial advisers may serve in this capacity for you, and they can provide these forms as well. If you use these standard forms, you should consult with an attorney or legal adviser to ensure that the form is current, meets your state's requirements, and, most importantly, addresses your specific needs.