3 Common Types of Power of Attorney

Understanding the various types of Power of Attorney (POA) is crucial, especially when planning for future legal matters or handling the affairs of a loved one. An individual can choose another trustworthy individual, called an agent, to act on their behalf in making choices by executing a Power of Attorney.

Therefore, it is essential to familiarize yourself with the different types to make a well-informed decision. Here are three common types of Power of Attorney that may cater to different needs and circumstances.

1. Special or Limited POA

An individual (the principal) can grant another (the agent) limited permission to act on their behalf in relation to certain subjects or occurrences through a limited or special POA. A limited POA restricts the agent's authority to act only in the areas designated by the principal, as opposed to a general POA that allows the agent full control over the principal's activities.

Principals should be explicit and specific about the matters they wish to delegate to agents before executing limited POA documents. In addition to preventing ambiguity and disagreements, this also ensures the agent does not abuse their position of power. To ensure the agent does not overstep the bounds of the restricted power of attorney, spell out their powers as precisely as possible.

Such a limited POA might be useful when the principal is temporarily unable to handle their business, such as while abroad or sick. You can also use it to sell a specific property or conduct a one-time banking or financial transaction. The principal can revoke it at any moment, allowing them to determine when the agent's permission expires.

2. General POA

With a general POA, an agent can represent a principal in many situations. When a principal appoints another individual to operate on their behalf, that individual is known as an agent. An agent's duties may include managing assets, purchasing and selling property, and entering into contracts. The agent can do many things for the principal under this power of attorney, including handling bank accounts, signing checks, and filing taxes.

However, The extent to which a general POA extends is subject to the laws of the individual states. It usually gives the agent much power to decide on the principal's money, company, property, and legal matters. An example of a situation where this form of power of attorney might be useful is when the principal needs someone to handle their business while they are away for a long time.

Remember that unless specifically stated otherwise, a general power of attorney will terminate upon the principal's death or incapacity. There may be limitations on the authority that a general POA can confer in some states. Ultimately, the principal's choice of POA type determines the individual with the legal capacity to revoke the power of attorney.

3. Durable POA

With a durable POA (DPOA), you can delegate decision-making authority over your assets and legal matters to another person. You can immediately delegate this authority to the agent or have it "spring" into action upon your incapacity. The DPOA eliminates the necessity for court intervention in the case of your incapacitation, empowering your agent to manage your financial and legal affairs.

If you ever lose the capacity to act, the durable POA will remain valid. This ensures that your designated agent can continue to act on your behalf in the event of your mental or physical incapacity. But medical choices, including turning off a person's life support, are outside the purview of the DPOA.

You can tailor a DPOA to your unique requirements. It may stipulate that the agent manages all your business, including investments, bill payments, property purchases, and sales. Another option is to restrict it to only certain legal and financial issues.

The DPOA terminates with the principal's mortality, and the agent loses all power to act in the principal's name. If the principal is still of sound mind, they can also use an annulment of power of attorney letter to remove the DPOA.

Contact us at Lifetime Estate for legal consultation on the best way to draft your will and appoint an agent with POA.