Most people, at some point in their life, either create a Power of Attorney (POA) or act as an Agent under a POA created by someone else. Unfortunately, a Power of Attorney is also one of the most frequently abused legal documents. One reason for that is that all too often the person creating the POA does not truly understand the power and authority conveyed in the document. With that in mind, the Grand Forks estate planning attorneys at German Law Group want to make sure that you understand what type of Power of Attorney you need before you execute one.
What Is a Power of Attorney?
At its most basic, a Power of Attorney is a legal document that allows you (referred to as the “Principal”) to grant another person (the “Agent”) the authority to act on your behalf in legal matters and transactions. The type and extent of the legal authority you grant to an Agent depends on the type of POA you create.
General vs. Limited Power of Attorney
When creating an executing a Power of Attorney the first choice to make is whether you need a general or limited POA. A general POA grants your Agent almost unfettered power to act on your behalf in legal matters. Consequently, your Agent may be able to do things such as withdraw funds from your financial accounts, sell or encumber property and assets owned by you, and even enter into contracts in your name. Although the law places some limits on the actions of an Agent with a general POA, you should never give someone a general POA if you have any doubt about their trustworthiness.
On the other hand, a limited POA only grants to your Agent the limited, and specific, authority enumerated in the POA. For example, you might grant an Agent the limited power of attorney to represent you at the closing on the new home you purchases because you will be out of the country at the time. Parents with minor children also frequently use a limited POA to grant a caregiver the authority to consent to medical care for their children in the event it is needed should an emergency arise.
Durable Power of Attorney
You also need to know the distinction between a traditional and a durable Power of Attorney. Historically, the authority granted to an Agent in a POA automatically terminated upon the death or incapacity of the Principal. As you may well imagine, however, the possibility of becoming incapacitated is a common motivation for executing a POA. In other words, many people create a POA specifically to ensure that their Agent named in the POA has the authority to act on their behalf if they suffer a period of incapacity. That does not work, however, if the POA terminates upon the incapacity of the Principal. To resolve this problem, the concept of a “durable” POA evolved. When a POA is made durable it simply means that the Agent’s authority survives the incapacity of the Principal.
Springing Power of Attorney
Yet another type of Power of Attorney is a Springing POA. Both a general and a limited POA can be a Springing POA. A Springing POA is has special language in it that causes the Agent’s authority to “spring” into action at a specific time or upon the occurrence of a specific event. For example, you might create a general POA that does not actually go into effect unless you have been missing for more than 48 hours or until you have been declared incapacitated by a physician.
Contact a Grand Forks Estate Planning Attorney
Please join us for an upcoming FREE seminar. If you have additional questions or concerns about what type of Power of Attorney is right for you, contact a Grand Forks estate planning attorney at German Law Group by calling 701-738-0060 to schedule an appointment.