What are the Different Types of Power of Attorney?

Attorney, distinguished law professor

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If you are thinking about your estate plan and other end-of-life issues, you might start to discover how many important decisions you have to make, like understanding the different types of power of attorney.

There are likely a few that you didn’t realize you have to think about, such as:

  • “Can I pay for my medical care?”
  • “Should I sell my stock?”
  • “How do I name a beneficiary in my will?”
  • “Do I want to be resuscitated?

With these questions, there are so many decisions, that it can feel a bit overwhelming. 

Jump ahead to these sections:

For many of us, we tend to put off these decisions until later. However, one of the most important decisions you should make right now is: “Who do I want to decide things for me if I can no longer make decisions?”

Unlike some of the other questions mentioned above, this is not an issue that can wait until later. A lot of those questions depend on your answer regarding who will be your decision-maker or have the power of attorney. You should consider executing a power of attorney now, while you still have the capacity to decide who you want to make your decisions in the event you are incapacitated and unable to speak for yourself.

However, there’s the basic question that some might have: What is a “power of attorney?” Below, we walk you through what makes a power of attorney so valuable, but also how to effectively choose one.

What is a Power of Attorney?

A power of attorney is simply a legal document with which you (the “principal”) authorize someone else (your “agent” or “attorney-in-fact”) to make decisions for you.

It sounds very simple, but consider how vital it is to make that decision now. What if something unexpected happens that prevents you from being able to make decisions? Who would make your decisions for you?

  • Is it your spouse?
  • A child?
  • A relative?
  • A friend?
  • Is it someone you trust?
  • Lastly and perhaps most importantly, is it someone who knows and respects what you would want?
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Steps to Take Before Choosing Your Agent

Before you choose your agent, there are two other decisions that you should consider. The first is: “What decisions do I want my agent to make for me?” The most common reasons why people use a power of attorney are for financial decisions, healthcare decisions, and end-of-life decisions.

A power of attorney can address any or all of these aspects of your life. 

The second decision to make before choosing your agent is: “What kind of power of attorney do I need?” There are different kinds of powers of attorney, and we’ve listed what the differences are between each kind below.

Understanding how powers of attorney work and what each one does may help you more carefully consider which power of attorney is right for you and who you want to be your agent.   

General or Non-Durable Power of Attorney

A general power of attorney authorizes your agent to make general legal decisions for you when you are not able, such as signing documents or taking money out of the bank.

To execute a general power of attorney, you must have sufficient mental capacity and be able to express clearly your instructions for your agent. You also can decide how long you want your agent to make decisions for you. 

For example, if you run a business and are going on vacation for two weeks, you might have a power of attorney to authorize a trusted employee to make business decisions for you while you are gone. At the end of two weeks, the power of attorney is terminated and your agent is no longer legally able to make your business decisions. 

If you do not set a definite term, a general power of attorney can last until you decide to end it. If you do not revoke your agent’s authority while you are still alive and well, it will automatically end when you die or become incapacitated.

Durable Power of Attorney

A durable power of attorney is one that authorizes your agent to act for you if or when you become incapacitated. It means that the authority of your agent to make decisions is durable and lasts through your incapacity. This power of attorney remains effective when you become incapacitated and terminates when you die or if you are no longer incapacitated.

A common need for a durable power of attorney is when someone develops Alzheimer’s disease. You would execute your durable power of attorney while you are still mentally able to execute legal documents, but if you become incapacitated by Alzheimer’s disease, your agent’s power to make your medical decisions, handle your finances, or sign legal documents, continues through your incapacity.

So it is particularly important that you choose an agent whom you trust and who will not be tempted to abuse their power to make decisions with your finances or legal documents that you would not have made yourself. 

Limited or Special Power of Attorney

A limited or special power of attorney is one that authorizes your agent to act for you for a “limited” purpose or for a “special” transaction for which you are not able to act for yourself.

For example, if you want someone to act on your behalf solely to make a banking transaction, sell a car, or execute a purchase agreement for a house, a limited power of attorney will restrict your agent’s power to that one designated act. Once the act is completed, the agent’s power to act on your behalf is terminated.     

Springing Power of Attorney

Unlike a general power of attorney, which terminates if you become incapacitated, and a durable power of attorney, which continues to be effective through your incapacity, a “springing” power of attorney only becomes effective upon the happening of a designated event.

For most people, that event is when the Principal (you) becomes incapacitated, incompetent, or disabled. But it could be any event you choose, after which you want someone to act on your behalf. 

“If I become unconscious in the hospital,” “When I travel outside the country for work,” or “When I begin caring for my elderly parent in my home,” are all perfect examples of a “designated” or particular event. 

A springing power of attorney is thought to “spring” into effect when something happens for which the Principal decides he or she will need someone to handle his or her affairs. 

Medical or Healthcare Power of Attorney

A medical or healthcare power of attorney is one that grants your agent the authority to make medical decisions for you if you are incapacitated. You may decide to grant medical decision-making authority to an agent in conjunction with your physician’s agreement and advice.

If your physician determines that you are unable to make medical decisions in your own best interest, a medical power of attorney gives your agent the legal authority to make your medical decisions for you.

This could include such decisions as:

  • Undergoing invasive procedures
  • Whether to consent to life support
  • Whether to be resuscitated 

Power of Attorney for the Care or Custody of Children

There are other powers of attorney that are executed for very specific purposes and are named appropriately.

A common example is a power of attorney for the care or custody of children. In the event that a parent or legal guardian may become terminally ill, imprisoned, or may undergo rehabilitation, they want to know that someone they can trust to act in their children’s best interest will care for them or take custody of them during their absence.

Choosing Your Agent

Sometimes deciding to execute a power of attorney and determining which kind you need is the easy part. Picking the right agent can be more difficult. Because a power of attorney grants your agent so much decision-making authority over you and the important aspects of your life, it is critical that you choose the right one.

You may feel compelled to choose your spouse because of your relationship and the love you have for each other. However, if your spouse has no business acumen, you probably don’t want them making your business decisions. 

You may want to choose your adult child because your spouse may be unable to handle all the decisions that have to be made if you were to be incapacitated. But if your adult child is irresponsible with finances, you may not want your child to have open access to your bank accounts. 

Selecting your best friend may feel like a logical decision because they know you better than anyone and will respect your decisions even though they may disagree with you. Choosing your best friend instead of your spouse, however, may cause hurt feelings, resentment, or even legal conflict, which you would like to avoid.

These are all important considerations. In the end, what is most important is that you choose an agent who will execute your wishes and act in a fiduciary, or legally responsible, capacity.

Thus, when selecting an agent, it is important to appoint the person who will best satisfy your needs.

Furthermore, you want to make sure the person you pick is agreeable. You’ll need to discuss all these issues with your prospective agent to be sure they understand what is required, what you want them to do, and why you are choosing them as your agent. 

If you anticipate that others may be resentful or have hurt feelings over your choice, it may be equally important to discuss with them why you are choosing the person or persons you are choosing. 

Having a Power of Attorney Doesn’t Have to Be Difficult 

There are so many decisions that we all have to make every day. Sometimes the easiest decisions seem like the most difficult ones to make—what shoes to wear to work, what to make for dinner, or what to watch on TV. We’ve all struggled with these rather inconsequential choices. 

Yet, it is a rare occasion, indeed, when our important, life-changing decisions come to us easily and without much consternation. But having a power of attorney is one of those decisions. Now that you know what a power of attorney is, how each one is different, and how important they can be when you need them, the decision to have a power of attorney is an easy one.

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