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At its most basic, a Power of Attorney (POA) 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.
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A POA can be either general or limited. A general POA grants your Agent almost unlimited power to act on your behalf. This means that your Agent may be able to do things such as withdraw funds from your financial accounts, sell property and assets owned by you, and even enter into contracts in your name. Given the power an Agent has under a General POA, you should have absolute trust in someone before giving them your General POA.
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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 specific power of attorney to act on your behalf during the sale of your vehicle while you are out of the state on a business trip. A limited POA is also frequently used by the parents of a minor child to grant a caregiver the authority to consent to medical care for a child in the event it is needed on an emergency basis.
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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.
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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.
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Most states recognize a type of advance directive known as a Health Care Power of Attorney. This is a special type of POA that allows the Agent to make health care decisions for the Principal is the Principal cannot make them as a result of his/her incapacity.
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Although the authority granted in a Power of Attorney should be clear, it is not uncommon for a third party to refuse to honor that authority. A third party may claim the POA was executed too long ago or question the authenticity of the document. A third party may also refuse to honor a POA unless it is created using their form. Consult with an attorney if you run into a problem using your Agent authority.
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Yes. Even a general Power of Attorney has limits. Exactly what those limits are will depend on the state; however, most states prohibit an Agent from self-dealing, making gifts in the Principal’s name, and making health care decisions for the Principal.
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Contact Us
For more information, contact an experienced Annapolis estate planning attorney at Sinclair Prosser Gasior by calling (410) 573-4818 to schedule an appointment.
