What is a Power of Attorney?
A power of attorney is a legal document that allows one person (the “principal”) to appoint another person (the “agent”) to make final decisions on their behalf. The power of attorney should be given to someone that you trust completely because they will have the power to make financial decisions on your behalf.
- A limited power of attorney gives an agent the power to act on your behalf for a very limited purpose. For example, a limited power of attorney could give someone the right to sign an important document or handle a financial transaction on your behalf if you are not available to do it yourself. A limited power of attorney ends at a time specified in the document.
- A general power of attorney is comprehensive and gives the agent all the powers and rights that you have. For example, your agent can open or close accounts, make financial donations, and pay bills. A general power of attorney ends when you die or become incapacitated unless you rescind it before then.
- A durable power of attorney can be general or limited in scope, but it remains in effect even after you become incapacitated. A durable power of attorney will remain in effect until your death unless you rescind it while you are not incapacitated.
- A springing power of attorney enables your agent to act for you the moment you become incapacitated, but no sooner. If you’re using a springing power of attorney, it’s very important that an asset protection lawyer clearly defines what the standard for determining incapacity is in the document itself.