What Is Power of Attorney (POA)?
Power of attorney (POA) is a legal authorization that gives a designated person, termed the agent or attorney-in-fact, the power to act for another person, known as the principal. The agent may be given broad or limited authority to make decisions about the principal’s property, finances, investments, or medical care.
Understanding Power of Attorney (POA)
Power of attorney is most frequently used in the event of a principal’s temporary or permanent illness or disability, or when the principal is unable to be present to sign necessary documents.
A power of attorney can end for several reasons, such as when the principal revokes the agreement or dies, when a court invalidates it, or when the agent can no longer carry out the responsibilities outlined. In the case of a married couple, the authorization may be invalidated if, the principal and the agent divorce.
There are many types of powers of attorney. A “durable” power of attorney takes effect when the document is signed while a “springing” power of attorney comes into effect only if and when the principal becomes incapacitated.
A power of attorney may also be limited to medical matters, enabling the agent to make crucial decisions on behalf of an incapacitated person.
Most powers of attorney documents authorize an agent to represent the principal in all property and financial matters as long as the principal’s mental state of mind is good. If the principal becomes incapable of making decisions for themselves, the agreement would automatically end.
A power of attorney for use in case of need might be considered by anyone planning for unexpected incapacitation or long-term care, no matter how remote such events appear to be. It might also be needed for someone expecting to be away from home and difficult to reach for some time. It can be a general or limited power of attorney.
Types of Power of Attorney
There are two key types of power of attorney (POA), one with general powers and one with limited powers.
General Power
A general power of attorney allows the agent to act on behalf of the principal in any matters, as allowed by state laws. The agent under such an agreement may be authorized to handle bank accounts, sign checks, sell property, manage assets, and file taxes for the principal.
Limited Powers
A limited power of attorney gives the agent the power to act on behalf of the principal in specific matters or events. It might explicitly state that the agent is only allowed to manage the principal’s retirement accounts.
A limited power of attorney may be in effect for a specific period. For example, if the principal will be out of the country for two years, the authorization might be effective only for that period.
Durable Power of Attorney (DPOA)
The durable power of attorney (DPOA) remains in control of certain legal, property, or financial matters specifically spelled out in the agreement, even after the principal becomes mentally incapacitated. While a DPOA can pay medical bills on behalf of the principal, the durable agent cannot make decisions related to the principal’s health (e.g., taking the principal off life support is not up to a DPOA).