What Type of Power of Attorney Do I Need?

The different types of power of attorney (POA) are designed to serve different legal and personal purposes. The type of power of attorney you name largely depends on your specific needs, as determined by your particular circumstances. To determine which option is best, it’s important to understand their differentiating factors.

In this article, we’ll break down the key differences between the most common types of power of attorney. What are their primary purposes? What is the scope of their power? What is their duration? When do they become effective? We’ll also detail the leading factors to consider when choosing the right POA for your needs. Keep reading to ensure you select the best POA to serve your financial and medical needs.

General Power of Attorney

A general power of attorney grants broad authority to a designated agent (attorney-in-fact) to manage a variety of transactions, namely, financial and legal management. It’s a common choice for anyone looking for a comprehensive and long-term solution for executing an estate plan or managing their financial affairs and business matters.

Common use cases for a general power of attorney can include:

• Real estate—grants authority to an estate planning attorney to buy, sell, and manage real estate assets
• Business matters—grants an agent the ability to manage your business interests and operations
• Legal matters—grants an agent the power to enter into or terminate contractual agreements

What is the scope of authority for a general POA? The principal (you) authorizes an attorney-in-fact to act on your behalf in your personal affairs—specifically, your financial and legal matters. Whether you need help managing property or business contracts or want to ensure your living will or estate plans are executed as you intend, a general power of attorney is great for anyone wanting long-term management over broad legal and financial decisions.

A general power of attorney typically remains in effect until the principal becomes incapacitated. For long-term management, even after you’ve become incapacitated, a durable power of attorney is necessary.

Durable Power of Attorney

A durable power of attorney (DPOA) plays a critical role in estate planning. Ensure your assets are protected and important financial decisions are made with your best interests in mind, even when you become incapacitated. A DPOA acts as a safeguard, protecting your financial interests.

Who can benefit from a DPOA? Anyone looking to take proactive control of their future finances. You can preemptively prevent mismanagement of your estate when you are no longer able to mentally or physically make sound decisions over your personal affairs, finances, or property. Incapacitation can be due to age, but may also result from injury, illness, or disability. The future is uncertain, but a DPOA can make sure that a trusted agent (appointed by you) makes critical financial decisions on your behalf.

A DPOA is commonly used to prioritize your best interests and efficiently manage your financial and estate planning through:

• Daily financial management—overseeing your bank account, developing and implementing investment strategies, and handling bill payments
• Financial decision-making—managing your stocks, bonds, or other assets, and handling real estate planning

How is the scope of authority for a DPOA determined? The power is in your hands; you decide how little or how far your agent’s power extends. Grant your agent broad power to handle all your assets, or limit their scope to specific financial transactions. You can even grant different durable powers of attorney to different people. Designate one agent to handle your finances and another to manage your healthcare.

A DPOA is a type of springing power of attorney: It only becomes effective once a specified event occurs. For example, a written declaration by a doctor declaring you are incapacitated.

Medical Power of Attorney

Thus far, we have explored different types of power of attorney that primarily manage your finances. What happens, however, when you are no longer able to make sound decisions regarding your health? This is where medical power of attorney steps in. Ensure your medical preferences are honored even when you are no longer able to communicate them.

A medical power of attorney grants authority to a healthcare agent, empowering them to make healthcare decisions on your behalf and ensuring your medical wishes are honored.

The common use cases for a medical power of attorney include:

• Consenting to surgical procedures: A healthcare agent can consent to surgeries imperative for your health. Additionally, if complications arise during a major surgery, your agent can make critical, time-sensitive decisions on your behalf.
• Managing long-term or degenerative illness: A medical POA can be essential to ensuring your medical wishes are honored as you face progressive conditions, such as dementia.
• Choosing end-of-life treatment: A medical POA grants authority to make decisions that align with your wishes for end-of-life care. They can decide whether to withdraw life support, use feeding tubes, or initiate other treatments that prolong life artificially.
• Select medical facilities: A medical POA can choose a healthcare facility that is best suited for your care.
• Avoid disputes and uncertainty: A medical POA outlines your medical wishes, making your preferences clear to loved ones, relieving them of the burden of guessing your wishes and avoiding disagreements and disputes.

Similar to a DPOA, the scope of authority for a medical POA can be as broad or as limited as you like. Specify which medical decisions your healthcare agent can make.

Limited Power of Attorney

A limited power of authority grants authority to your agent for a specific and limited task, such as selling property in your absence. This type of POA is ideal for someone who needs help with a one-time transaction. It can also limit your agent’s power to a certain timeframe: Grant power to manage specific transactions while you are on vacation or undergoing a medical procedure.

Examples include:

• Real estate transactions: An agent can sign documents and finalize the sale of your property.
• Banking tasks: Authorize an agent to make banking deposits or withdrawals.
• Tax filings: Empower an agent to file your taxes or collect your tax refund.
• Vehicle purchase: Authorize your agent to sign purchase agreements and registration documents so they can purchase a vehicle on your behalf.

Consider These Key Factors When Choosing the Right Power of Attorney

When making a choice between the different types of power of attorney, consider:

• Financial or healthcare needs: Do you need a power of attorney for financial matters, healthcare decisions, or both?
• Duration of authority: Are you looking for help managing short-term or long-term tasks? Do you want POA to remain effective after incapacity?
• When authority takes effect: Should your POA be effective immediately or only once a specified event occurs?
• Agent trustworthiness: Who do you completely trust to act as your agent? They will have significant authority, and you need them to act in your best interests.

Consider these differentiating factors and select accordingly. Remember to consult a legal professional, such as an attorney, who can help you determine which POA is best for your particular circumstances. They can customize a POA that best aligns with your wishes while complying with state laws. When you are ready to find the best fit, contact our professional team at Warren Allen LLP. We will always provide you with exceptional service and sound legal advice. Contact us today and learn what your options are.