Power of Attorney

Power of Attorney

A power of attorney is a legal instrument authorizing one to act as the attorney-in-fact or agent of the principal. Powers of attorney can help avoid the necessity of petitioning a court for the appointment of a conservator or guardian in the event of incapacity. Incapacity strikes young and old, rich and poor. An event causing incapacity can strike at any time: a car accident, a stroke, a collision on the ski hill, a sudden illness, or an industrial injury.

Roles Under a Power of Attorney

A power of attorney has two key roles:

  • Principal: the individual who grants to another person the ability to act on their behalf if they become incapacitated or upon the occurrence another condition established by the individual, or immediately, depending upon the terms of the power of attorney
  • Agent: the person nominated by the principal to act on the principal’s behalf in a fiduciary manner also known as the attorney-in-fact.

Types of Power of Attorney

There are different types of financial powers of attorney, including the following:

  • Springing Power of Attorney: takes effect only upon the happening of a condition precedent, typically the incapacity of the principal
  • Immediate Power of Attorney: grants the agent the power to act on behalf of the principal immediately without having to wait for the principal’s incapacity
  • General Power of Attorney: gives the agent broad authority to make decisions on the principal’s behalf
  • Limited Power of Attorney: limits what an agent can do to certain transactions that are identified in the document
  • Durable Power of Attorney: remains valid until revoked or until the principal passes away—in other words, it survives the principal’s incapacity

Financial Power of Attorney

A comprehensive estate plan should always include a financial power of attorney that appoints an agent, serving in a fiduciary capacity, to act on behalf of a person who cannot manage his or her own property or finances.

  • Appoints an agent, serving in a fiduciary capacity, to act on behalf of a person who cannot manage their own property or finances
  • It may grant authority to conduct all financial matters or only specific transactions
  • Types of transactions include withdrawing money from a bank account, buying and selling property, signing legal documents, operating a business, accessing a safe deposit box, making gifts

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