Most of us don’t know
what powers of attorney are until we need them. But we should all have at least
one so decisions don’t need to be made on the fly — or by the courts.
What Is a Power of Attorney?
A power of attorney (POA) is a document that gives an agent the right to
act on behalf of someone else. Five different types grant varying levels of
authority. It’s important to note that the POA is by state. If you have POA for
your uncle in North Carolina and he moves to Florida, the POA is invalid. Some
states require annual recertification. Also, POAs die with the person. If you
have POA for Aunt Caroline and she passes away, you no longer have any legal
right to handle her financial or other affairs, unless granted in a will.
Finally, Social Security is a federal, not a state, program. As such, it does
not recognize POAs. You must become a representative payee to handle Social
Security on behalf of someone else.
The five types of POA offer different types of protection.
Durable Power of Attorney (DPOA) vs.
Non-Durable Power of Attorney.
Unless stated otherwise, a POA becomes effective immediately after it is signed
(and notarized). If it is durable, the agent will continue to have authority to
make decisions even if you become incapacitated, such as by having dementia or
going into a coma. If it is a non-durable POA, it simply means that the agent
loses authority if you become incapacitated. As we said above, all POAs end
with the person’s death. The person can also rescind a POA with a revocation
form, as long as he or she is competent. Most of the POAs listed below can be
Medical Power of Attorney.
Also known as an advance directive, a medical power of attorney allows an agent
to make medical decisions for you if you cannot make them yourself. These
include surgical procedures, organ donation, choice of health care facilities
and a broad range of medical treatment. Your agent will also make sure health
providers carry out wishes you have specified in your do not resuscitate (DNR)
form or living will.
General Power of Attorney.
A general POA grants broad powers. The agent can make decisions for you
regarding business, financial, legal matters and real estate. Your agent will
be able to pay bills, enter into contracts, buy or sell property and manage
banking. Because it is so extensive in nature, it is usually used for a short
period, such as when you will be traveling extensively where you cannot be
Limited, or Special, Power of Attorney.
This gives an agent the power to act on your behalf just like a general POA,
but it its limited to specific purposes. You may elect to grant someone the
power to cash checks for you, for example, but not access or otherwise manage
your finances. It’s possible to create any number of limited POAs for different
agents. They will expire once a specific task is done, or at the time specified
on the document.
Springing, or Conditional, Power of Attorney.
This type of POA only goes into effect in the event of a medical condition
(usually incapacitation) or another trigger specified in the POA. A soldier
might create a springing power of attorney that is only in effect when he or
she is deployed overseas. It can end when the person becomes incapacitated or
at a specified date. As with every type of POA, it will also end upon death.
When drawing up a POA, it’s important to be very careful and
specific about the agent’s activities and duties. Financial institutions and
brokers will look for specific language, and if it’s not there, it can cause
some big headaches. One financial agent listed on a client’s POA was unable to
access her CDs because the bank had erroneously listed them as being in a
trust. If a trust is involved, the trustee or successor trustee must be the one
to make financial changes. These sorts of issues can get thorny and require
trips in front of a judge when the person is incapacitated.