What is a Power of Attorney(POA)?
Table of Contents
What Is a Power of Attorney?
When Do You Need a Power of Attorney?
Types of Powers of Attorney
What Is A Power Of Attorney (POA)?
When you create a power of attorney, you need to decide what level of authority to vest in your agent.
There are different kinds of powers of attorney that you can create depending how much power you wish to transfer. Here are some of the most common types.
General Power of Attorney
General power of attorney is a comprehensive grant of authority. It applies for as long as you live and remain of sound mind. There is no limiting language, so your agent or attorney-in-fact can act on your behalf in all matters.
Limited Power of Attorney
A limited power of attorney is much more restrictive than a general power of attorney. This is used when you grant someone authority for a limited, specific purpose rather than generally granting them authority.
For example, you might want your attorney-in-fact to have legal authority to sign documents transferring ownership of your investments while you are out of the country.
A limited power of attorney includes language specifying the limits on the authority you are granting to your attorney-in-fact. For example, it might specify that the POA is in effect only for a month while you are away and that the POA only enables your attorney-in-fact to manage a particular type of investment.
Durable Power of Attorney
A durable power of attorney is one that remains in effect even if you become incapacitated. It differs from a general power of attorney, which becomes inactive when you become mentally unsound and unable to make decisions on your behalf.
This type of POA must have language that clearly indicates it is meant to be durable. If you do that, the grant of authority to your agent remains in effect for life unless you formally revoke it.
A durable power of attorney can be used when you are creating an incapacity plan or an estate plan.
Springing Power of Attorney
A springing power of attorney is a grant of authority that goes into effect when a specific triggering event occurs. For example, you could specify that your attorney-in-fact gets the authority to act on your behalf only if you become incapacitated.
A springing durable power of attorney is an ideal tool to allow someone to act for you only if you become mentally unable to act on your own accord.
Medical Power of Attorney
A medical POA is a durable power of attorney which gives your attorney-in-fact authority to make healthcare decisions on your behalf. This is more commonly called a health care proxy or advance directive. If you want to ensure you get to decide who makes choices about your medical care when you cannot speak for yourself, creating a medical POA is important.
A medical power of attorney can be made in conjunction with a living will, which is another estate planning document that allows you to specify in advance what kinds of medical procedures you would prefer to accept or reject. The POA gives someone the ability to make medical decisions when you are incapacitated which your living will does not address.
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