The Power of Attorney (POA) is one of the undisputed kings of planning documents. You appoint someone as your agent and give them authority to act on your behalf if you can’t—authority to pay bills, manage assets, make medical decisions, etc. If your physical or mental capabilities decline to the point you can’t make decisions or care for yourself and there’s no POA in place, there could be a delay in your care and a lot of money spent getting a court to appoint a guardian or custodian.
Many years ago, my dad had some temporary health issues that caused him to fall. I talked to Dad about what could happen if he fell again or his health got worse. He was receptive to the POA idea and agreed. Some years later, his health declined and because there was a POA document, I was able to step in immediately.
Not every person sees the necessity of having a Power of Attorney. Some of my clients have never been able to convince their parents that a POA is for their benefit; it’s not an attempt to steal the parents’ stuff. When the parents became incapacitated, it created problems that were unnecessary.
Multiple Powers of Attorney
When it comes to Powers of Attorney, one size doesn’t necessarily fit all. There are multiple types of POA. Each serves a different purpose and grants varying levels of authority.
General Power of Attorney
A general power of attorney gives your agent broad power to act on your behalf. That person can make financial, business, real estate, and legal decisions. Because the agent has such sweeping authority you may want to use this kind of POA for short time frames such as short-term illnesses or if you are traveling outside the country. The powers granted under a General Power of Attorney may be restricted by state statutes. The GPOA expires if you become incapacitated.
Durable Power of Attorney
A durable power of attorney (DPOA) is effective immediately after you sign it, unless stated otherwise. It allows your agent to continue acting in your stead if you become incapacitated. The agent can make financial, business, real estate, and legal decisions as well as medical decisions.
You can rescind a DPOA using a revocation of power of attorney form as long as you are competent. A Durable Power of Attorney ends at the moment you die.
Non-Durable Power of Attorney
A non-durable power of attorney expires if you become incapacitated or die. For example, if you fall into a coma, your agent loses the authority granted in the NDPOA and a court will have to appoint a guardian or conservator to make decisions for you.
Medical Power of Attorney
A medical power of attorney or advance directive is used to name a healthcare agent who will make your healthcare decisions if you can’t. That person will also make sure that healthcare providers give you the medical care specified in your Do Not resuscitate (DNR) form and your Living Will.
An MPOA becomes effective as soon as you sign it, but can only be used if you have been declared mentally incompetent by a physician. Medical decisions are the only ones granted by the MPOA. Financial, business, real estate, and legal decisions are excluded.
Limited (Special) Power of Attorney
A limited power of attorney gives your agent the authority to act for you only in specific instances, for example, cashing checks. In this case, your agent cannot conduct any other financial business for you.
You can create several limited powers of attorney naming different agents, granting each individual different powers. The limited power of attorney expires once the specific task of the LPOA has been completed.
Conditional (Springing) Power of Attorney
A conditional power of attorney only goes into effect if a specific event or medical condition listed in the CPOA happens. For example, a member of the military may create a conditional power of attorney that goes into effect when the soldier is deployed overseas. It can end at a specific time, when you become incapacitated, or upon death.
Even though the Power of Attorney is a legally crafted, legally established document that gives your agent(s) the right to act on your behalf, there are some glitches to be aware of, especially in the financial services industry.
- Some financial firms may have their own rules about accepting POAs. They may require a POA that’s been executed within the last 6 months. Some require the POA to have been signed in the last 60 days unless it’s been certified by a bank officer.
- Some financial firms require the POA to be on the firm’s form and that the form has to be re-executed every year or at least on a regular basis.
- Some financial firms won’t accept a POA executed in a state other than the state-of-residence of the grantor.
- Some financial firms won’t recognize a POA whose agent lives in a state different than your state of residence.
- It’s not uncommon that a financial firm requires the agent of a POA to fill out firm forms with all the agent’s information and prove they really are the person appointed in the POA.
Knowing these limitations, plan ahead. Once you’ve created your POAs, get copies to the firms and organizations that will deal with your agent, if the time comes. Introduce the agent to the people they’ll be dealing with at these organizations. Planning now can make things much easier if your Powers of Attorney have to be used.
This article is for information purposes only and is not intended as legal advice.