A power of attorney is a very important estate planning document that enables you to appoint someone to act on your behalf for financial, medical, or other reasons when you have become incapacitated or otherwise unable to effectively handle your own affairs. The person appointed becomes your “attorney-in-fact,” or agent, and you become the principal. Before you execute this document, it is important that you understand the various types. Below we discuss the main types of powers of attorney.
Durable and Non-Durable Power of Attorney
A durable power of attorney can remain in effect for as long as the principal wishes. It can allow an agent to manage all of the affairs of their principal should they become incapacitated and unable to do so themselves. In contrast, a non-durable power of attorney will expire if you become incapacitated or incompetent before the specific transaction specified in your document occurs. The durable power of attorney is therefore much more enduring as it does not have a set period of time, does not expire on the death of the principal, and instead becomes effective immediately when the principal becomes incapacitated.
Special or Limited Power of Attorney
A limited or special power of attorney gives your agent the power to act in your place for only a limited purpose or period of time. The duration is usually specified in the document and is generally for a one-time transaction. The agent has no other authority to act on behalf of the principal other than the stated purpose. It is often used in special circumstances when the principal is unable to complete the particular transaction due to an illness or prior commitment.
General Power of Attorney
A general power of attorney is the most comprehensive form as it gives your agent all of the powers and rights that you have regarding your own affairs. It can be used for any purpose, such as the power to pay your bills, the right to sign documents for you, or the right to enter into financial or real estate transactions on your behalf. You do not need to be incapacitated to use this. A general power of attorney ends upon your death or incapacitation if not rescinded prior to those events.
Medical Power of Attorney
This grants the agent the power to make medical decisions on behalf of the principal by taking control over their healthcare plan if and when the principal becomes unable to do so for themselves. The medical attorney-in-fact is your agent only for medical and healthcare related purposes.
Springing Power of Attorney
A springing power of attorney is similar to a durable power of attorney in that it allows your attorney-in-fact to act for you if you become incapacitated or upon another specified event. However, this does not become effective until the event stated in the power of attorney document actually occurs. If you are using a springing power of attorney, it is essential that your document is drafted with the utmost specificity regarding the parameters and standards used for determining the event that triggers the power.
Given the important power the agent has as your attorney-in-fact, it is crucial to think hard about who you will appoint. Equally as important as choosing your agent is the drafting of the legal document itself. It is therefore prudent to discuss your options and estate plan with a qualified attorney. If you have any questions regarding your estate plan and how a power of attorney may help you, contact Hulbert & Associates to discuss your options today.
