Power of Attorney
A power of attorney authorizes a designated person to manage aspects of another’s affairs. The powers granted may be broad and far-reaching, specific and limited, effective indefinitely, or effective for a specified amount of time. Below, we’ve answered common power of attorney questions to help no matter your needs.
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Understanding Power of Attorney:
What Is a Power of Attorney?
A power of attorney is the legal vehicle through which one person may be granted authority to act for another person in financial, legal, or medical matters. The scope of the authority granted may be broad or specific, as desired. The power granted may also be indefinite or temporary, as desired.
In the language of the power of attorney document, the person granting the power of attorney is referred to as the “principal.” The person granted decision-making power is known as the “agent” or “attorney-in-fact.” (We’ll call them the “agent” on this page.)
A power of attorney document may be desirable in any circumstance in which you want to grant another person the power to make decisions on your behalf. People preparing for international travel, expats, and deployed military personnel can all benefit from having a power of attorney.
The most common use of a power of attorney is in estate planning—often supplementing a will or a trust—to prepare for medical issues that may render a person unable to make decisions for themselves. It is important to plan ahead when creating a power of attorney as such documents can’t be created for people who have already become incapacitated.
Below, we’ve defined the various types of power of attorney, compared a few of them, and answered numerous questions to help you understand how it all stacks up.
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Types of Power of Attorney
There are five broad types of power of attorney: general, limited, non-durable, durable, and springing.
Additionally, some of these powers of attorney can be combined. The most common example of this is General Durable Power of Attorney, which grants an agent wide-reaching authority until the death of the principal.
What is a general power of attorney?
A general power of attorney grants the agent authority to act in a wide range of legal, medical, financial, and business matters. Agent authority includes but is not necessarily limited to:
- Buying and selling assets, including real estate
- Opening and closing financial accounts
- Paying bills
- Filing taxes
- Entering into legal contracts
- Initiating a lawsuit on the principal’s behalf
Authority not granted by a general power of attorney can vary by state. However, in many cases an agent for a general power of attorney may not:
- Write or make changes to a principal’s will
- Make post-mortem decisions regarding the principal’s estate
- Transfer power of attorney to another party
- Vote for the principal in a political election
- Break their fiduciary responsibility to the principal
What is a limited power of attorney?
A limited power of attorney (aka special power of attorney) is specific to a narrowly defined event or task and ends when that event occurs or the task is completed. A limited power of attorney contains unique language describing the authority granted and the time period or event it is granted for.
Common types of limited powers of attorney include:
- Medical power of attorney
- Financial power of attorney
A limited power of attorney can be as specific as desired and may be written using language that authorizes action on a single task.
A limited power of attorney is often used in business. You might grant limited power of attorney to a trusted colleague to purchase real estate on your behalf, or to make a certain business decision while you are away.
What is a durable power of attorney?
A durable power of attorney gives the agent the authority to act on behalf of the principal even if the principal becomes mentally incompetent. Unless canceled, a durable power of attorney remains valid until the death of the principal.
If a person becomes incapacitated and doesn’t have a durable power of attorney, their family may face arduous court proceedings before the agent can take care of their finances. So, it can be a good idea to have one in place.
What is a non-durable power of attorney?
A non-durable power of attorney does not stay in place if the principal becomes incapacitated. Should the principal become incapacitated, a non-durable power of attorney will be void.
What is a springing power of attorney?
A springing power of attorney becomes effective only once a specific condition is met. This is most typically used for estate planning purposes in which the principal wants an agent to be given authority over their affairs once they’ve become incompetent, but not until then.
This option can be complicated by the fact that determining if a person is legally incompetent can be difficult and time consuming.
Have questions about which power of attorney is right for you?
We can help. Want an attorney to draft or review your power of attorney? We can do that, too. Learn MoreThe Uniform Power of Attorney Act
Powers of attorney are regulated by state law. The Uniform Power of Attorney Act eliminates variations in state law regarding power of attorney regulations for states that adopt it.
To date, 26 states have adopted the Uniform Power of Attorney Act: Alabama, Arkansas, Colorado, Connecticut, Georgia, Hawaii, Idaho, Iowa, Maine, Maryland, Montana, Nebraska, Nevada, New Hampshire, New Mexico, North Carolina, Ohio, Pennsylvania, South Carolina, Texas, Utah, Virginia, Washington, West Virginia, Wisconsin, and Wyoming.
These 26 states offer reciprocity, so that a power of attorney drafted and signed in one state will hold up in another state.
Power of Attorney FAQs
Who needs a power of attorney?
Almost every adult has due cause to consider a power of attorney for estate planning purposes. A durable power of attorney can be especially useful, as it allows the agent to make decisions once the principal is incapacitated. This might include changes to how your money is managed or what medical choices are made for you. Putting a trusted person in charge of those decisions before something negative happens to your health can streamline a stressful process.
What happens if I become incapacitated without a power of attorney in place?
If you become legally incapacitated without a durable power of attorney in place, your family may be subjected to lengthy legal proceedings in order to conduct financial actions in your name, and even to make medical decisions for you.
What are the benefits of having a power of attorney?
The benefit of having a power of attorney is knowing that if you are unable to make important decisions, you can grant that power to an agent who can carry out decisions for you. You can grant this authority in a specific or general way, and as long as you understand how powers of attorney work, they can become a powerful tool for your business and personal life.
Can I change a power of attorney document once it’s been drafted?
Absolutely. A principal can revoke or amend a power of attorney at any time. Once amended, it is a good idea to notify any institution that has the power of attorney on file.
How do I use a power of attorney?
Agents for a power of attorney need to bring either a certified copy or a photocopy of the document when interacting with other entities such as banks or health care providers. Some institutions will not accept photocopies but all will accept certified copies. When signing documents as power of attorney, agents will use their name and then indicate that they’re signing as power of attorney.
How do I revoke a power of attorney?
The principal granting any power of attorney can revoke that power at any time, as long as they’re mentally competent to do so. Revocation of a power of attorney should be done in writing. It’s also a good idea to notify financial institutions and other businesses that the agent no longer has power to act in the principal’s name.
The question of who can override a power of attorney for a loved one is more difficult. If someone believes that another person is abusing their position as power of attorney, legal action may be needed to have them removed.