A power of attorney allows a person you appoint, your “attorney-in-fact” or agent, to act in your place for financial or other purposes when and if you ever become incapacitated or if you can’t act on your own behalf. There are four main types of powers of attorney: limited, general, durable, and springing.
A power of attorney (POA) is a legal document that grants authority to an individual or entity, known as the “agent” or “attorney-in-fact,” to act on behalf of another person, known as the “principal.” The principal delegates specific powers or authority to the agent, allowing them to make decisions, sign documents, and take action on the principal’s behalf.
Key Points about a Power of Attorney:
- Types of Powers of Attorney: There are different types of powers of attorney, each serving different purposes and time frames:
- General Power of Attorney: Grants broad authority to the agent to handle various financial and legal matters on behalf of the principal
- Limited or Special Power of Attorney: Grants specific and limited authority to the agent for particular transactions or purposes, often with a defined duration.
- Durable Power of Attorney: Remains in effect even if the principal becomes incapacitated or unable to make decisions. This is essential for long-term planning and management of the principal’s affairs in case of disability.
- Springing Power of Attorney: Becomes effective only upon the occurrence of a specific event, such as the principal’s incapacity.
- Responsibilities of the Agent: The agent has a fiduciary duty to act in the best interests of the principal, make decisions consistent with the principal’s wishes, and avoid conflicts of interest. The agent must act prudently, honestly, and responsibly while exercising the powers granted in the power of attorney.
- Revocation and Termination: The principal has the right to revoke or terminate the power of attorney at any time, as long as they have the mental capacity to do so. Additionally, a power of attorney may have an expiration date or may be limited to a specific event or transaction.
- Legal Requirements: A power of attorney must typically be executed in writing, signed by the principal, and often requires witnesses or notarization, depending on the jurisdiction’s laws.
- Use Cases: Powers of attorney are commonly used for various situations, such as handling financial matters, real estate transactions, business dealings, medical decisions, and legal representation.
- Not a Substitute for a Will: It’s important to note that a power of attorney is different from a medical designation or directive, living will or last will and testament. A will comes into effect after the principal’s death, while a power of attorney is active during the principal’s lifetime. Read more about the difference between living wills and a power of attorney by clicking here.