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What is Power of Attorney (POA)?
How Does It Work

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C.L. Mike Schmidt Published by C.L. Mike Schmidt
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A power of attorney is necessary if you are incapable of making decisions for yourself or are otherwise unable to do so. 

I've worked with my clients to draw up a number of power of attorney documents. From my experience, I can say that different types of power of attorney are appropriate in different circumstances. I'll explain this article's various powers of attorney and how to use each.

Quick Summary

  • An official document known as a power of attorney enables one person to act on behalf of another.
  • The agent's legal authority to choose the principal's possessions, finances, or medical care may be broad or restricted.
  •  If you signed a power of attorney are you were not mentally competent, under the influence of someone else, or in violation of state law's signing requirements, your power of attorney may be disputed.

What is a Power of Attorney (POA)?

A business man signing paperwork on a clipboardA power of attorney (POA) is a legal document that grants a named individual the authority and valid power to act on behalf of another [1].

Your "agent" or "attorney-in-fact" is the person designated in a power of attorney to act on your own behalf. The actual document must frequently be presented before your agent can use the power. 

The attorney must show a power of attorney to any company before signing any paperwork on your behalf to buy or sell real estate.

To sell securities or open and close bank accounts, the agent must similarly present a power of attorney to a broker or banker.

However, when signing checks on your behalf, your agent shouldn't typically need to show a power of attorney.

A POA thereby grants the agent or attorney-in-fact the power to act in the principal's place. The principal's property, finances, investments, and medical care may be subject to the agent's decision-making, which may be given broad powers or limited authority [2].

7 Types of Powers of Attorney

A gavel sitting on top of a large book

POAs come in 7 different forms, and each has a particular function. The person in charge of your affairs may need to be the same person, or you may prefer that they be distinguished from the person making decisions about your healthcare.  

The following list includes some of the choices :

  1. Durable/Non-Durable POA
  2. Springing POA
  3. General POA
  4. Limited POA
  5. Medical POA
  6. Financial POA
  7. Military POA

It's essential to weigh all of your options before choosing a POA because each type of POA has advantages.

1. Durable/Nondurable POA

Even after the principal loses mental capacity, the durable POA (DPOA) continues to be in charge of specific financial, property, or legal matters stated in the agreement under specified circumstances and with durable power.

A DPOA allows the durable attorney to pay for the principal's medical expenses. Still, it does not allow the durable attorney to make health-related decisions for the principal, such as withdrawing life support. 

Someone having such a power of attorney can make you uncomfortable. If you don't like the risk of giving someone such power or permanent control over your affairs, then you could consider a nondurable power of attorney.

"A person appointed as power of attorney is not necessarily an attorney. The person could be a trusted family member, friend, or acquaintance."
- American Bar Association

A limited legal authority is known as a "nondurable power of attorney." The person you designate has the authority to take actions in your name in relation to contracts and financial matters, such as authorizing payments and more. 

The powers granted by you to that person are based on the specific powers you specify in the power of attorney document. In other words, more restrictions apply to nondurable POAs than to durable power ones. 

2. Springing POA 

A lawyer signing a brown envelopeA "springing" power of attorney is a legal document that specifies the circumstances under which a durable POA may become effective. 

A springing POA specifies the type of occurrence or degree of incapacity required before the DPOA springs into action. A springing POA goes into effect as soon as you are deemed physically or mentally incapacitated.

The lack of clarity surrounding a declaration of physical or mental unfitness is a significant disadvantage of a springing POA.

I suggest you carefully word the springing power of attorney to avoid any issues with pinpointing precisely when and if the triggering event has occurred.

3. General POA

A general power of attorney gives your actual agent broad authority.

These capabilities may include:

  • Making gifts
  • Resolving disputes
  • Purchase of life insurance
  • Interests in running a business
  • Using professional assistance
  • Managing business and financial transactions

4. Limited POA

A businessman signing paperworkThis POA document, also referred to as a "special power of attorney," restricts the agent's authority.

What powers an agent may exercise can be stated explicitly by signing a special power of attorney.

If you cannot handle certain matters due to other obligations or health issues, you may use this POA.

Some routine matters listed in a special POA document include: selling both real property and personal property, managing real estate, collecting debts, and managing business transactions.

5. Medical POA

A medical power of attorney, also known as a durable healthcare power of attorney, empowers your agent to make healthcare decisions regarding your health on your behalf. 

If you are in a special circumstance where you are found unconscious, mentally incompetent, or otherwise unable to make decisions on your own, your agent will have the authority to make end-of-life decisions.

Many states permit you to include your preference for being kept on life support in a medical POA, though this is not the same as a living will. The health care POA and living will be combined in some states to create an advanced health care directive.

6. Financial POA

A lawyer stamping paperworkFinancial power of attorney enables a fiduciary to manage your finances while you're away.

They have the power to sell property, handle other businesses or pay bills. This can be a nondurable POA that applies to circumstances in which you are absent, like a protracted trip abroad. 

It can also be a durable power of attorney for finances (POA) that applies in cases where you are mentally or physically incapable of making sound financial decisions for yourself.

7. Military POA

Similar to civilian powers of attorney, military powers of attorney vary in their scope, and the level of authority you grant is entirely up to you. 

Due to the frequent travel associated with military roles, having a power of attorney for a military spouse can be helpful for many everyday situations, such as accessing your bank account, registering a car, or filing taxes.

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What Are the Limits of a Power of Attorney?

The limits of a power of attorney may vary depending on the type of power of attorney you use.

Some of these limitations include the inability to transfer the responsibility to another agent, the inability to distribute inheritance or transfer assets, and the inability to act outside the principal's best interest.

How to Create a Power of Attorney?

To create a power of attorney, you must first choose your agent after determining which power of attorney you require. It's crucial to remember that any attorney-in-fact must represent your interests and do so as effectively as possible.

You can streamline the power of attorney delegation process with a few simple steps.

1. Determine the Number of Agents You'll Need

A business man looking at paperworkYou may appoint more than one agent to represent your interests; however, you must decide whether these attorneys-in-fact must make decisions jointly or separately.

In the event that your medical or financial affairs are complicated, using multiple agents may be beneficial.

I advise the clients to name at least three alternate agents for their durable power of attorney and themselves. 

This will guarantee that naming more than one durable attorney can still avoid guardianship if one attorney is unable or unwilling to act (and the client is already incapacitated) because a successor is named in a power of attorney.

2. Locate a Person Whose Interests Align With Your Own

A person talking to someone on a ehadsetWhen selecting an agent for your power of attorney, trust is essential. It would help if you had an agent who would protect your interests, respect your wishes, and not abuse the authority given to them, whether that agent is a friend, relative, company, or attorney.

Give power of attorney to an individual who you know will handle the duty responsibly.

If you, a friend, or a family member believe your attorney-in-fact has violated the law, you should notify the police and seek legal advice.

3. Ensure That You or a Third Party Receive Updates

An agent must maintain accurate records of all transactions on your behalf and give you regular updates to keep you informed. 

Choosing a Power of Attorney

You might want to appoint one of your family members to represent you. Numerous people use the names of their partners or one or more children. 

When appointing more than one person to serve as an agent concurrently, keep in mind that not all of them might be available to act when necessary, or they might not all agree.

Choosing co-agents should reflect your preference for having the majority act without complete availability and consent. 

Whether or not you designate co-agents, you should still designate one or more successor agents to cover the eventuality that the person you designate as an agent might be unable or unwilling to act when the time comes.

Related Article: How Much Does it Cost to Talk to a Lawyer?

Risks Associated with Choosing a Power of Attorney

A person with a headacheEven if your child is acting as your agent, you should be aware of the risks of theft and self-dealing that a POA creates. 

Having your POA requires your agent to report all actions to a third party will help to reduce the risk of such wrongdoing.

Some states demand that a letter of this nature be notarized, just like the document itself. After that, draft a new POA and give it to your new preferred agent.


Will My Power of Attorney Expire?

Your power of attorney will expire Ii it is not a durable power of attorney since it is still in effect until you either die or revoke it. In some states, a power of attorney's renewal was necessary to remain in effect.

What Kinds of Powers Should I Give My Agent?

The powers you should give your agent include the power to make decisions in your absence, the power to receive money from your estate, and the power to make financial decisions concerning your home.

Can I Appoint Multiple Powers of Attorney?

Yes, you can appoint multiple powers of attorney. You should also decide if these agents should act jointly or independently.

What Does a Power of Attorney Cost?

The cost of a power of attorney varies depending on where you get your document and who assists you in filling it out.

A power of attorney document is frequently prepared for an hourly fee by attorneys. Online services often charge less than lawyers and offer different pricing tiers based on the level of legal assistance you require.

Do You Want To Choose A Power Of Attorney?

By creating a power of attorney, you can ensure that you have a plan for managing your financial affairs and health directives, especially when you become incapable of doing so.

Please make sure the person you select is trustworthy and capable of performing their duties on your behalf with integrity.

If you need help drafting a power of attorney, you can contact Schmidt & Clark and have a free consultation with a team of the best power of attorney representatives in the area.

They will help you understand your choices and draft an appropriate power of attorney that works for you.



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