The Four Types of Power of Attorney
A Power of Attorney allows you, known as the principal, to appoint someone to make financial and other decisions on your behalf if you no longer can due to illness or diminished mental capacity. There are four types of Power of Attorney designed for specific situations. Let’s look at each one.
General Power of Attorney
General – A General Power of Attorney provides broad powers to your agent or “attorney-in-fact” – the person you appoint to manage your affairs. This person is your legal representative who can pay your bills, make financial transactions, and sign legal documents on your behalf. This type of Power of Attorney is utilized while the principal is competent but may need help with financial matters. It terminates upon the principal’s death, incapacitation, or revocation.
Limited Power of Attorney
Limited – A Limited Power of Attorney has, as the title suggests, limited powers and a limited effective timeframe. The attorney-in-fact is granted legal authority to perform a particular action on your behalf. Typically, it can be to sign a document if you are away, sell a piece of property or a home, or conduct a financial transaction such as cashing a check. The Limited Power of Attorney document would state a starting and termination date. You can also include a provision that would trigger when the document is to become effective and when it would end.
Durable Power of Attorney
Durable – A Durable Power of Attorney allows the attorney-in-fact to continue acting on your behalf if you become incapacitated or mentally incompetent. The attorney-in-fact’s powers can be limited or general. Without this “durable” provision added to your Power of Attorney document, the attorney-in-fact would no longer be able to represent you if you become incapacitated. A court order would have to be sought in order to appoint a guardian or conservator to act in your stead. The Durable Power of Attorney remains in effect until revocation or your death.
Springing Power of Attorney
Springing – The Springing Power of Attorney “springs” into effect if you become incapacitated. It allows your attorney-in-fact to represent you should you become incapable of making your own decisions. In this case, the triggering point that activates the Springing Power of Attorney must be clearly spelled out in the document. The level of incapacitation or incompetency needs to be defined to avoid any possible confusion over the principal meeting the conditions outlined. Otherwise, family members may have to go to court for a determination. This type of power of attorney is to be avoided, as it may cause more problems than is solves.
Estate Planning & Power of Attorney
The Power of Attorney is an important Estate Planning tool. However, some people are uncomfortable having someone controlling their affairs. It is crucial the person you select as your Power of Attorney is someone you can trust to control your finances and make important decisions on your behalf.
The important thing to remember about all of these types of documents is that they are referred to as “extra-judicial” documents, thus do not carry the same weight as a court order would. Remember, a power of attorney is only as good as the respect accorded that document by the recipient. The recipient has to be convinced that it is legitimate, has not been revoked and is not “stale”. There is no legal standard under which that determination is made. Thus Powers of Attorney should be unambiguous, meticulous in its draftsmanship, and updated regularly.
Contact us at SKB Attorneys. We can help you choose the best Power of Attorney for your situation.
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