Types of Powers of Attorney

Types of Powers of Attorney

The two key types of POAs are financial and health care. We outline some of the main differences between these two and highlight some of the main types of financial POAs.

Health Care Power of Attorney (HCPOA)

The principal can sign a durable power of attorney for health care, or health care POA (HCPOA), if they want an agent to have the power to make health-related decisions. This document also called a health care proxy, outlines the principal’s consent to give the agent POA privileges in the event of an unfortunate medical condition.3

The POA for health care is legally bound to oversee medical care decisions on behalf of the principal. As such, it kicks in when the principal can no longer make health-related decisions on their own.3

Financial Power of Attorney

The financial POA is a document that allows an agent to manage the business and financial affairs of the principal, such as signing checks, filing tax returns, mailing and depositing Social Security checks, and managing investment accounts when and if the latter becomes unable to understand or make decisions. The agent must carry out the principal’s wishes to the best of their ability, at least to the extent of what the agreement spells out as the agent’s responsibility. A financial POA gives that individual a wide range of power over one’s bank account, including the ability to make deposits and withdrawals, sign checks, and make or change beneficiary designations.

Financial POAs can be divided up into several different categories. These are the general power POA, limited power POA, and durable POA.

General Power POA

This POA 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.3

Limited POA

limited power of attorney gives the agent the power to act on behalf of the principal in specific matters or events.1 It might explicitly state that the agent is only allowed to manage the principal’s retirement accounts. This type of POA 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 POA (DPOA) remains in control of certain legal, property, or financial matters specifically spelled out in the agreement, even after the principal becomes mentally incapacitated.3

While a DPOA can pay medical bills on behalf of the principal, the durable agent cannot make decisions related to the principal’s health, such as taking the principal off life support.3 When the agent acts on behalf of the principal by making investment decisions through a broker, the broker would ask to see the DPOA.

The conditions for which a durable POA may become active are set up in a document called the “springing” power of attorney. A springing POA defines the kind of event or level of incapacitation that should occur before the DPOA springs into effect.3 A power of attorney can remain dormant until a negative health occurrence activates it to a DPOA. A springing power of attorney should be very carefully worded to avoid any problems in identifying precisely when and if the triggering event has happened.

A person appointed as power of attorney is not necessarily an attorney. The person could be a trusted family member, friend, or acquaintance.1

How to Setup a Power of Attorney

You can buy or download a POA template. If you do, be sure it is for your state, as requirements differ. However, this document may be too important to leave to the chance that you got the correct form and handled it properly. Many states require that the signature of the principal (the person who initiates the POA) be notarized. Some states also require that witnesses’ signatures be notarized.

The following provisos apply generally, nationwide, and everyone who needs to create a POA should be aware of them:

  • There is no standard POA form for all 50 states; state law and procedures vary
  • All states accept some version of the durable power of attorney1

A few key powers cannot be delegated. These include the authority to do the following:

  • Make, amend, or revoke a will
  • Contract a marriage in most states, although a handful of states allow it
  • Vote (but the guardian may request a ballot on behalf of the principal)

While the details may differ, the following rules apply coast to coast:

  • Put It in Writing: While some regions of the country accept oral POA grants, verbal instruction is not a reliable substitute for getting each of the powers of attorney granted to your agent spelled out word-for-word on paper. Written clarity helps to avoid arguments and confusion.
  • Use the Proper Format: Many variations of POA forms exist. Some POAs are short-lived while others are meant to last until death. Decide what powers you wish to grant and prepare a POA specific to that desire. The POA must also satisfy the requirements of your state. To find a form that will be accepted by a court of law in the state in which you live, perform an internet search or ask a local estate planning professional to help you. The best option is to use an attorney.
  • Identify the Parties: The term for the person granting the POA is the principal. The individual who receives the power of attorney is called either the agent or the attorney-in-fact. Check whether your state requires that you use specific terminology.
  • Delegate the Powers: A POA can be as broad or as limited as the principal wishes. However, each of the powers granted must be clear, even if the principal grants the agent a general POA. In other words, the principal cannot grant sweeping authority such as, “I delegate all things having to do with my life.”
  • Specify Durability: In most states, a POA terminates if the principal is incapacitated. If this happens, the only way an agent can keep their powers is if it was written with an indication that it is durable, a designation that makes it last for the principal’s lifetime unless the principal revokes it.
  • Notarize the POA: Many states require powers of attorney to be notarized. Even in states that don’t, it is potentially easier for the agent if a notary’s seal and signature are on the document.
  • Record It: Not all powers of attorney must be recorded formally by the county to be legal. But recording is standard practice for many estate planners and individuals who want to create a record that the document exists.
  • File It: Some states require specific kinds of POAs to be filed with a court or government office before they can be made valid. For instance, Ohio requires that any POA used to grant grandparents guardianship over a child must be filed with the juvenile court.4 It also requires a POA that transfers real estate to be recorded by the county in which the property is located.5

You can start the process of establishing a power of attorney by locating an attorney who specializes in family law in your state. If attorney fees are more than you can afford, legal services offices staffed with credentialed attorneys exist in virtually every part of the United States. Visit the Legal Services Corporation’s website, which has a “Get Legal Help” search function. Clients who qualify will receive pro bono (cost-free) assistance.

2 Comments

  1. I am really grafeful too the holder oof thios website whho has sharedd thi impressiv piece off writijng aat aat thhis place.

Leave a Reply

Your email address will not be published. Required fields are marked *

Back to top button