Power of attorney (POA) documents are an important component of an estate plan. There are four types. You should review each carefully to see which one will work best for you in your situation. What is required for a power of attorney depends upon what power you want to authorize, says Carmel’s Hamlet Hub in a recent article titled “4 Types of Power of Attorney.”
1. Limited Power of Attorney. If you need someone to act on your behalf for a limited purpose, use a limited power of attorney. This will specify the date/time after which the power no longer is in effect.
General Power of Attorney. This is an all-encompassing power of attorney, in which you assign every power and right you possess as an individual to a certain party. It’s typically used where the principal is incapacitated. It is also used with those who don’t have the time, skills, knowledge, or energy to handle all of their financial matters. The power you assign is in effect for your lifetime, or until you are incapacitated (unless it is also “durable”). However, you can elect to rescind it before then.
For further reading, find out how your Powers of Attorney can help you protect your assets here.
Durable Power of Attorney. The key distinction with a durable power of attorney is that it stays in effect, even after you’ve become incapacitated. Therefore, you want to sign a durable power of attorney if: (i) you want to give the designated agent authority ONLY if you’re unable to act for yourself; or (ii) you want to give the agent immediate authority that continues after you’re unable to act for yourself.
Note that a limited or general power of attorney ends when you become incapacitated. At that point, a court will appoint a guardian or conservator to handle your matters. You can rescind a durable power of attorney at any time prior to becoming incapacitated.
Springing Power of Attorney. This document serves the same purpose as a durable power of attorney, but it’s effective only upon your becoming incapacitated. When drafting this, your experienced estate planning attorney will help you make clear your definition of “incapacitated.”
Remember that you’ll need to state in your power of attorney document which powers and duties you are assigning to the attorney-in-fact.
Regardless of the type of power of attorney you implement, the attorney-in-fact has the power to do only what your POA indicates.
Reference: Carmel’s Hamlet Hub (Dec. 16, 2020) “4 Types of Power of Attorney”