A Power of Attorney, sometimes referred to as POA, is an estate planning document that is used to appoint someone (an agent) to manage your affairs. There are different types of power of attorney. Each serves a different purpose and gives different levels of authority to your agent.
General Power of Attorney
A general power of attorney is comprehensive and gives your agent all the rights and powers that you, yourself, have. The agent can perform almost any act for you, such as opening financial accounts, signing documents for you, or managing finances. A general power of attorney is terminated when you (the principal) become incapacitated, revoke the power of attorney or when you pass away.
A general power of attorney could be used if you were not incapacitated but you still needed someone to help you with your financial matters. This person would have complete control over your personal matters. Your agent would need to be someone you can rely on and that you trust completely.
Durable Power of Attorney
A durable power of attorney can be general or limited but it remains in effect after you become incapacitated. If you do not have a durable power of attorney and you become incapacitated, no one will be able to represent you unless the courts appoint someone to be your conservator or your guardian.
A durable power of attorney arrangement designates a person to act on your behalf. A durable power of attorney will remain in effect until you pass away unless you rescind the POA after you are not incapacitated any longer.
The agent you choose as your durable power of attorney will have control over your medical decisions, along with decisions about your personal matters and finances. This person needs to be someone that you completely trust to have you best interest in mind at all times.
Special or Limited Power of Attorney
A special or limited power of attorney gives another person the power to act on your behalf for a very limited purpose. With a special or limited power of attorney, the person you appoint (the agent) has specific powers that are limited to only a certain area.
For example, a limited power of attorney agreement could give someone the power to sign a deed to property for you on a day that you are out of town or can not attend for any reason. It could also give someone else the power to buy or sell real estate on your behalf. The power of attorney typically ends at the time agreed upon in the document.
A special or limited power of attorney could be given to a real estate agent or other type of professional that you hire to buy or sell property for you. The risk isn’t as great with a special or limited power of attorney because it is usually stated in the document, what needs to be done. The agent isn’t making as many decisions on your behalf that he or she would be with the other types of power of attorney.
Springing Durable Power of Attorney
Similar to a durable power of attorney, a springing durable power of attorney can allow your attorney-in-fact to act for you in the case that you become incapacitated. However, with a springing durable power of attorney, it does not become effective until you are incapacitated. For instance, you might appoint someone to become your power of attorney should you be involved in an accident and aren’t able to make decisions on your own. You might also appoint someone if you were to become ill and need someone else to make medical decisions for you if you can’t.
If you are appointing an agent with a springing durable power of attorney, it is extremely important that the standard for determining your incapacity or the event that triggers the power of attorney to be clearly and solidly documented in the document itself.
A power of attorney is an extremely important estate planning tool. It is crucial that you understand the difference in each type of power of attorney so that you can use each one for the purpose you need. You need to know what your options are.
You need to be able to carefully choose your agent or agents. The person you choose will have a lot or total control over your finances and it is critical that you choose the right person. You need to be able to completely trust the person.
Regardless of what type of power of attorney you choose, it’s important to know what each of them are and what they mean. If you have more questions, please contact us today. We will be happy to answer any questions you might have and make sure you have the right plan for choosing which type or types of power of attorney is right for you.