The Power of Attorney: The Different Types
Power of Attorney - the Different Types
If you are thinking about creating a Power of Attorney (POA) for yourself, or providing such a service for someone else, keep in mind that there are different types. And equally important - It is not necessary to actually be an attorney.
The power of attorney is an instrument that provides authorization for someone to act as an agent of the Principal and terminates some time in the future based on the terms of the instrument.
To begin with, a person who has Power of Attorney, (also known as an agent or Attorney-in-Fact) for another person has a legal duty to always act in the best interest of the person, (known as the Principal), who gives them this power.
Why have a POA for yourself? In the case of a sudden illness, or an accident, or whenever someone is needed to handle your affairs - the POA is created in advance in anticipation of such a need.
Once a POA is created, the agent assumes particular responsibilities. They become fiduciaries and must act with the highest degree of good faith.
Several basic rules must always be followed. This includes:
1 - Keeping the principal's money separately
2 - Keeping detailed records of all transactions -- which can be requested at any time
3 - In no way profiting by any of the transactions
4 - Not transferring or making a gift of the principal's money, personal property, or real estate unless the type of POA in effect explicitly permits it
Below is a list of the different types of Powers of Attorney - and each type gives the agent very specific responsibilities
General Power of Attorney - When an agent has a general power of attorney, the agent can use any of the principal's assets to conduct just about every type of business or financial transaction. In the case of a general power of attorney, the agent has no restraints whatsoever.
Special or Limited Power of Attorney - In this case the agent has the power to perform certain specific acts or just one act. For example, the agent is permitted to act on behalf of the principal and complete a real estate transaction.
Health Care Power of Attorney - has the responsibility of making health care decisions on behalf of the principal should the principal become mentally incompetent, unconscious or incapacitated in some way. In some states, the agent may be required to decide whether or not the principal will receive "life-sustaining-procedures" if terminally ill, or permanently comatose.
Springing Power of Attorney - Any Power of Attorney can be written to go into effect as soon as the principal signs it. However, the springing power of attorney gives the agent power only when some event occurs, that acts as a trigger - at which time it "springs" into effect.
Examples of a trigger includes when the principal reaches a certain age, a particular calendar date, or when a doctor certifies that the principal has become incapacitated.
Unless, a POA specifically states otherwise, an agent's authority will end when the principal becomes mentally incapacitated.
Durable Power of Attorney - This special or health care POA has special durability provisions. Should the principal become mentally incompetent - with a POA already in effect, a durable provision will allow the document to remain in effect. This will allow the agent to continue to act in the best interest of the principal.
Note: The power of attorney can be revoked at any time as long as the principal is competent.
Creating a Power of Attorney
Have you planned ahead and created a power of attorney?
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