What Is a Power Of Attorney?

A Power of Attorney (POA) is a legal document that gives one person (the agent or attorney-in-fact) the power to act on behalf of another person (the principal). The agent can have broad legal or limited authority to decide on the principal's property, finances, or medical care. A power of attorney is frequently used in the event of a principal's illness or disability or when the principal can't be present to sign necessary legal documents for financial transactions.

There are different types of power of attorney, each with its own specific implications:

1. General Power of Attorney: In a general power of attorney, the principal grants the agent broad authority to act and make decisions on their behalf. This can include handling financial matters, managing property, buying life insurance, operating business interests, settling claims, making gifts, and even employing professional help. This arrangement can be beneficial if the principal travels frequently or cannot manage their affairs. However, choosing a trusted individual to act as the agent is crucial, as this type of POA provides extensive power and may be vulnerable to misuse.

2. Durable Power of Attorney: Unlike a general POA, a durable POA remains in effect if the principal becomes incapacitated. A standard POA automatically ends when the principal becomes mentally incapacitated, but a durable POA includes specific language stating that it continues to apply even in such circumstances. This type is often used in long-term planning, allowing a trusted individual to handle the principal's affairs in case they become unable to do so themselves due to illness, accident, or aging.

3. Special or Limited Power of Attorney: This type of POA is used when the principal wants the agent to handle specific tasks only. For example, suppose the principal needs someone to manage a property sale while they are away. In that case, they might set up a limited POA that authorizes the agent to sign only documents related to the property sale. This type of POA usually ends when the task is completed or at a specific date mentioned in the document.

4. Health Care Power of Attorney: Also known as medical power of attorney, this type of POA allows the agent to make medical decisions on the principal's behalf if the principal becomes incapacitated and unable to make such decisions. The agent could decide on treatment options, healthcare providers, medical procedures, and end-of-life decisions, depending on what is specified in the POA document.

5. Springing Power of Attorney: This type of POA "springs" into effect under the circumstances specified by the principal, often the principal's incapacitation. Until those conditions are met, the agent has no authority. Some jurisdictions, however, have specific rules or do not allow springing POAs, as determining the exact moment of incapacitation can be legally complex.

To be valid, a power of attorney must be signed and dated by the principal, and often, depending on the jurisdiction, it must be witnessed and notarized. It's important to note that a power of attorney ends if the principal dies, is revoked by the principal, or, in some cases, if the principal becomes incapacitated (unless it's a durable power of attorney).

Regardless of the type of power of attorney, ensuring it is properly drafted, witnessed, and notarized as required by the law in your jurisdiction is vital. Selecting a reliable and competent agent is crucial, as they will have the legal authority to make important decisions on your behalf. Consider seeking legal advice when dealing with important legal documents such as a power of attorney.