Types of Power of Attorney

Power of attorney ( or POA, for short) is a document that gives a person (or entity) the legal authority to act on another person’s behalf. The creator of the document is called the principal. In order for the agreement to become a legally binding document, all parties must sign the document in front of a notary. With the exception of real estate transactions, a power of attorney generally does not have to be filed with a government agency.

Once the power of attorney has been signed in front of a notary (or filed with the court if required), the person or entity that has been granted the legal authority to act on the principal’s behalf becomes the agent. Also called attorney-in-fact, the agent is usually a trusted family member, friend, or associate. In some cases, the principal may appoint more than one agent to act on his behalf. This is usually the case when there is a high likelihood of the agent later becoming incapacitated or otherwise unavailable. In general, the agent is authorized to act on behalf of the principal only as it pertains to certain specified acts or kinds (exchanges).

Common Types of Power of Attorney

There are many different types of power of attorney. Some are very similar in nature, while others are unique. Some of the most common types of power of attorney include durable power of attorney, non-durable power of attorney, power of attorney for health care, power of attorney for finances, springing power of attorney, limited power of attorney, and general power of attorney.

Durable and Non-Durable Power of Attorney

A durable power of attorney is a type of power of attorney that  is effective when the principal becomes incapacitated or disabled. If a power of attorney is not made durable, it will automatically expire. A principal may consider a durable power of attorney if the possibility of an illness in the future exists.

A non-durable power of attorney is also called a special power of attorney. This type of power of attorney is typically used for single transactions such as the closing of a sale on a home, a stock trade, or if the principal is traveling abroad and cannot conduct business back home. A non-durable power of attorney becomes effective immediately. It becomes null and void when revoked by the principal or upon the principal’s death.

Power of Attorney for Health Care

Also referred to as a medical care power of attorney, medical power of attorney, or health care proxy, a power of attorney for health care is unique. In this instance, a person creates an agreement that gives another person the legal authority to make medical decisions for them, should they lose the ability to communicate their preferences for treatment or make those decisions on their own. The person given the power to make medical decisions on one’s behalf may be called an agent, attorney-in-fact, or patient advocate. It is important to note that most states prohibit medical providers and employees of medical providers from being named agents in a power of attorney for health care. The durable power of attorney differs from state to state.

Power of Attorney for Finances

A power of attorney for finances is unique as well. This legal document gives an agent the authority to manage another’s financial affairs only, should the principal become disabled and cannot express his or her wishes. In a power of attorney for finances, the agent may be a trusted friend, family member, attorney, accountant, associate, or other trustworthy individual.

Springing Power of Attorney

A springing power of attorney is effective only when a specific event takes place. This document is created by one person (the principal) giving another person (the agent), the legal authority to handle the principal’s affairs at a future time, should an event such as an illness or disability occur. In many cases, a springing power of attorney will stipulate that it will only become effective after the principal’s doctor has determined that he or she is incapacitated or unable to handle his or her own affairs. A springing power of attorney remains in effect until the principal dies or until the document is nullified by the court.

The Difference Between Limited Power of Attorney and General Power of Attorney

Limited power of attorney is common in the world of investing. Also called LPOA, a limited power of attorney gives an agent the power to handle very specific (and limited matters) such as trades, disbursements, payments, offers, property transfers, and others. Limited power of attorney is the polar opposite of general power of attorney. General power of attorney is a legal document that gives an agent the authority to handle all legally permissible matters on behalf of the principal. In many cases, this may be the only type of power of attorney an individual needs.

Case Studies: Different Types of Power of Attorney

Case Study 1: Durable Power of Attorney for Long-Term Care

Emily, a 70-year-old retiree, appoints her daughter, Sarah, as her agent through a durable power of attorney for long-term care. Emily wants to ensure that Sarah can make important decisions about her healthcare and finances if she becomes incapacitated due to age-related issues. The durable power of attorney provides peace of mind to both Emily and Sarah, knowing that Emily’s best interests will be protected even if she loses the ability to communicate her preferences.

Case Study 2: Non-Durable Power of Attorney for a Real Estate Transaction

John is planning to sell his house while he is away on an extended vacation. He appoints his friend, Mark, as his agent through a non-durable power of attorney specifically for the real estate transaction. Mark has the authority to handle all the necessary paperwork, negotiate with potential buyers, and complete the sale on John’s behalf. Once the transaction is complete, the non-durable power of attorney becomes null and void, ensuring that Mark’s authority is limited to this specific transaction only.

Case Study 3: Power of Attorney for Health Care in an Emergency

Sarah, a young professional, creates a power of attorney for health care to appoint her sister, Lisa, as her agent. Sarah frequently travels for work and wants to ensure that someone she trusts can make medical decisions on her behalf in case of an emergency. Lisa, as Sarah’s agent, will have the legal authority to communicate with healthcare providers, consent to treatments, and ensure that Sarah’s medical wishes are respected even if she is unable to express them herself.

Case Study 4: Power of Attorney for Finances during Disability

James, a successful entrepreneur, establishes a power of attorney for finances to designate his long-time business partner, Michael, as his agent. James wants Michael to manage his financial affairs if he ever becomes disabled and unable to handle his own finances. This legal document grants Michael the authority to make investment decisions, pay bills, and conduct other financial transactions on James’s behalf, ensuring that James’s business interests are protected even during his incapacity.

Case Study 5: Springing Power of Attorney for Elderly Parents

Jennifer, who lives in a different state from her aging parents, sets up a springing power of attorney. She names her brother, David, as her parents’ agent. This power of attorney becomes effective only when a specific event, such as the parents’ incapacity, takes place. If Jennifer’s parents are deemed unable to handle their own affairs, David can step in as their agent, making financial decisions, managing their assets, and ensuring their well-being according to their wishes.

Case Study 6: Limited Power of Attorney for Investment Management

Robert, a busy professional, grants his financial advisor, Anna, a limited power of attorney for investment management. Robert specifies that Anna can make trades, disbursements, and manage his investment portfolio but does not have authority over any other financial matters. The limited power of attorney allows Robert to delegate specific tasks to Anna while maintaining control over other aspects of his financial affairs.

Case Study 7: General Power of Attorney for Comprehensive Representation

Amy, a senior citizen, decides to establish a general power of attorney. She appoints her eldest daughter, Rebecca, as her agent to handle all legally permissible matters on her behalf. This comprehensive power of attorney allows Rebecca to act as Amy’s representative in various situations, such as managing finances, making healthcare decisions, signing legal documents, and conducting other day-to-day affairs.