Life can be hard. Trying to figure out the right solution for every problem or determine the best course of action to make your finances stretch further is tricky. Not to mention that there are all sorts of dangers that could leave us incapacitated or reduce our mental capacity. Sometimes it feels like life would be easier if we could hand off some of the responsibility to another party.
As it turns out, you can through a power of attorney. A power of attorney is the means through which you can appoint another individual to make financial and legal decisions on your behalf. This could mean letting a lawyer cover or assist you on specific legal issues, or even something more simple like allowing a realtor to make offers on your behalf financially.
Today we’re going to look at the four different types of power of attorney. These range from the general to the limited and from the durable to the springing. They each function in their own ways, so this exploration will give you a much better understanding of when each one would be appropriate. We will also explore the difference between financial power of attorney and medical power of attorney.
What Is a General Power of Attorney and what is a Limited Power of Attorney?
Power of attorney can be given to tackle a range of issues. Most estate plans typically include either financial or medical powers of attorney. However, these describe the purpose that the power of attorney is used for and not so much the features of the power of attorney itself. For example, it is possible to give a general power of attorney over to, say, a real estate agent to place a bid for a house on your behalf. But, more commonly, you would use a limited power of attorney for this.
A general power of attorney is the broadest type of power of attorney that can be given. As the principal, you appoint an “attorney-in-fact” to manage your affairs. They have the legal power to pay bills, make financial transactions, sign legal documents, and perform other actions that you would normally have to do on your own.
General power of attorney lasts until the principal passes away, becomes incapacitated, or the powers are revoked. Unlike other types of power of attorney, the principal is mentally competent.
Not every “attorney-in-fact” will be able to perform each of the above listed actions. This will depend upon which powers you have approved and included in the POA document you’ve put together for the purpose. However, this starts to enter into the realm of a limited power of attorney.
In contrast to a general power of attorney, a limited power of attorney has limited powers and a limited timeframe. This type of power of attorney is most often granted for specific reasons. For example, you’re out of town but a document needs to be signed, or you grant it to a realtor in order to sell a property on your behalf. The original form establishing a limited power of attorney would include the necessary information about when it ends.
What Are a Durable Power of Attorney and a Springing Power of Attorney?
Whereas a general power of attorney terminated when the principal becomes incapacitated, a durable power of attorney continues to be effective. However, this says nothing about the actual powers granted to the “attorney-in-fact.”
A general power of attorney or a limited power of attorney can both be durable. This is a provision added to a power of attorney document. So say you grant a general power of attorney to your lawyer but become incapacitated. At that point they would lose any powers that had been granted to them. But if the original document included a provision that the power was durable, then they would still be able to act on your behalf.
Should you become incapacitated then a guardian or conservator would need to be appointed to act in your stead. This helps to ensure that a durable power of attorney is not abused simply because the principal wouldn’t be able to stop it.
A springing power of attorney is one that comes into effect (or “springs” into effect) when you become incapacitated. While a durable power of attorney remains in effect, this type only comes into effect with incapacitation. However, the level of incapacitation needs to be clearly defined in the original document, otherwise these powers could trigger too early and create confusion that needs to be sorted out with the help of a court.
What Is the Difference Between Financial Power of Attorney and Medical Power of Attorney?
There is often a distinction made between financial power of attorney and medical power of attorney. However, this distinction isn’t as clear as it might at first seem. Both financial and medical powers can be given in a general, limited, durable, or springing fashion.
The major difference between these two is what they cover, and that is set forth in the power of attorney document that is put together. So say you want to have that real estate agent sell property on your behalf. The document created would clearly state the limitations of their powers; that way, your real estate agent doesn’t accidentally end up with the power to make medical decisions for you.
How Do I Determine the Best Type of Power of Attorney For My Current Problem?
The best way to ensure you select the best type of power of attorney for your goals is to work with an experienced attorney that understands how the various types of power of attorney function. They will be able to provide you with detailed information about how each could be used to achieve your goals and which is the best option for you. That way, you can be sure that all the information you are basing your decision on is relevant, up-to-date, and specific to your needs.