What is the Difference between Limited and General Power of Attorney?

power of attorney

And When Should Some Powers of Attorney be “Durable”?

You may have had some exposure to executing a power of attorney in your lifetime. Essentially, a power of attorney, or POA, is a document that grants legal authority to another individual to act on your behalf. The reason for that can be varied – perhaps you are granting someone the authority to manage your financial affairs while you are traveling or to represent you at a real estate closing when you cannot be there. A certain type of POA can also be granted in areas such as healthcare decisions or giving someone broad agency to act on your behalf when you become incapacitated. 

No one else can set up a POA for you; it must be initiated by you, and you must do so at a time when you have sufficient mental capacity to understand the nature of the document and the implication of signing it. Not all POAs are created equal. Depending on the purpose, you may need a power of attorney that is limited in nature or one that has very broad authority, and it may be important for a power of attorney to be “durable.” 

A limited power of attorney is just that – it is limited either in terms of specific tasks and/or it has an expiration date. A limited power of attorney can even be confined to a single transaction (such as selling a house), but it also could grant broad authority over a limited timeframe (for instance, if you need assistance with managing various aspects of your life while you are traveling abroad for an extended period of time). 

Unless otherwise specified, a power of attorney will take effect once it is fully executed and signed. And, unless a power attorney is specifically written to apply when you lose mental capacity (i.e., it must be “durable”), it will become ineffective during any period of time that you lose capacity to act on your own behalf.

When planning for the possibility of a future disability, a POA usually should have very broad powers to cover most if not all aspects of your financial life (often called a “general” power of attorney), and you will need the POA to be “durable” – that is, the POA must contain language expressly stating it will remain effective even after you lose mental capacity and become unable to conduct your own affairs.  

One of the most important decisions you must make, is who you will name as your “agent” or “attorney-in-fact” – i.e., who do you trust the most to manage your affairs if you are not able to oversee what they are doing?

Often, durable general powers of attorney can be effective immediately, but they are not given to the named agent until assistance is needed. In contrast, a POA also could be “springing” – that is, it “springs” into effect, or is triggered, by a specific event such as illness or incapacitation.  

POAs for financial matters can be effective immediately or springing. However, medical POAs, or health care proxies, are springing by definition – that is, a named health care agent has no authority to make medical decisions for you until a medical professional has determined you lack the capacity to make your own decisions.

As with any legal document, the importance is in the details. Whoever you designate to be your agent – whether for finances or medical decisions – should be someone you absolutely trust, both in competency and character. Any POA should be evaluated for need and be carefully considered and executed, including being as detailed as possible. This means clearly describing the purpose, scope, any triggering event, and any applicable start and end dates. You may even determine you need more than one, depending on your needs. 

A Power of Attorney can be a powerful tool in estate and life planning that requires careful consideration and execution according to the specific laws governing POAs in your state. Using an attorney who is knowledgeable in those state laws and the POA process can help prevent any potential issues.