A comprehensive estate plan is about much more than what happens to your property when you pass on. A wise estate strategy is one that accounts for what happens during important situations when you’re still alive but unable to take care of yourself. In such a situation, your financial affairs are crucial to address – and a power of attorney can help.
What Is a Power of Attorney?
Simply put, a power of attorney is a legal document that allows you to appoint an “attorney-in-fact” or agent to act in your best interests when you need them to do so. People typically reserve attorney powers for times when they are incapacitated due to injury or illness, but this isn’t the only time powers can be granted. Sometimes elderly people who develop problems with their memory will invoke attorney powers, allowing a trusted person to help them manage their finances and other important issues.
There are different types of attorney powers that can go into effect when someone chooses to or when a specific event occurs. Some attorney powers spring into action when the principal becomes incapacitated or invokes them, other powers are terminated at death or incapacitation, or upon revocation by the principal.
There are four main types of attorney powers that people can use, depending upon how they want to plan for the future:
- Limited Power of Attorney
- General Power of Attorney
- Durable Power of Attorney
- Springing Power of Attorney
Limited Power of Attorney
This attorney power allows someone to act as you in your affairs for a very limited purpose. It can be to ensure your bills are paid or to conduct a major one-time transaction, such as one involving real estate.
As previously mentioned, people don’t need to be sick or injured to assign attorney powers. They don’t even need to be elderly. Often, people who simply need or want someone to do something important for them while they’re out of the country or away on business can invoke a limited power of attorney.
General Power of Attorney
This is a comprehensive attorney power that assigns your agent with all of the powers you would have if you were handling your affairs on your own. Your agent for a general power of attorney can sign documents, open bank accounts, pay your bills, conduct transactions, and more, and it would be as if
you were doing it yourself.
A general power of attorney doesn’t withstand the principal’s incapacitation. This means attorney powers terminate if you become so sick or injured that you can’t make informed decisions on your own. General powers of attorney will terminate at this time, as well as upon your death or revocation of the powers.
Durable Power of Attorney
A durable power of attorney can be limited or general in its scope, meaning you can customize how much control your agent has over your affairs. This attorney power is so named because it’s “durable” enough to withstand incapacitation. In other words, it does not automatically terminate upon your incapacitation from illness or injury. For this reason, a durable power of attorney can be an invaluable factor in your overall estate plan. Importantly, though, you can’t revoke a durable power of attorney once it’s in effect, and it will only terminate upon your death.
Springing Power of Attorney
A springing power of attorney “springs” into action when a specified event occurs. In many cases, this can include the incapacitation of the principal. At this time, and only at this time, will a springing power of attorney go into effect. Like a durable power of attorney, though, springing powers are typically irrevocable by the principal.