It’s important to ensure that your affairs are properly managed when you’re no longer able to do so yourself. Designating a power of attorney is one legal step that you can take to protect your financial and medical affairs as you get older and your risk of incapacitation increases.
You may be surprised to learn that there are multiple types of power of attorney. Understanding the differences between these types can help you make better legal decisions for later in life. Here, we’ll review the main types of power of attorney and their value to your end-of-life plan.
What is a Power of Attorney?
A power of attorney is a legal document that grants another person the ability to act on your behalf. This document is generally included in an estate plan, which is a comprehensive plan for the distribution of your assets after your death. Other documents in an estate plan may include a will, beneficiary designations, and a letter of intent.
As people get older, they may lose the ability to make decisions for themselves. For example, one may develop a cognitive condition like dementia that impairs their ability to manage their own affairs. In situations like this, a power of attorney is helpful to ensure that financial and medical matters are carried out according to their wishes. In a power of attorney, the agent is appointed by the principal to act on his or her behalf.
What Are The Main Types of Power of Attorney?
Different types of power of attorney exist to serve different purposes in your end-of-life plan. Many people designate multiple powers of attorney to ensure that all of their assets and affairs are covered.
The main types of power of attorney include:
Durable Power of Attorney
A durable power of attorney grants an agent the ability to handle all of the principal’s affairs if the principal becomes incapacitated. If the principal becomes unable to manage their affairs, a durable power of attorney will take effect immediately. This type of power of attorney expires at the time of death of the principal, but does not otherwise have a time limit.
Non-Durable Power of Attorney
Non-durable powers of attorney are more restricted than durable powers of attorney. As a non-durable power of attorney, one can typically only act on behalf of the principal for a specific transaction. Additionally, this type of power of attorney is only in effect for a specific time period and expires once the transaction is finished.
Medical Power of Attorney
A medical power of attorney is granted the ability to manage medical decisions for the principal if he or she becomes incapacitated. For a medical power of attorney to take effect, the principal’s physician must provide authorization.
Springing Power of Attorney
A springing power of attorney takes effect only when the principal becomes incapacitated. Additionally, a specific event must usually take place for the responsibilities of a springing power of attorney to begin. Springing powers of attorneys may be made either durable or non-durable. Especially for a springing power of attorney, a clear definition of incapacitation is essential. You must ensure that the agent’s ability to act on your behalf is clear and according to your wishes. Otherwise, your springing power of attorney won’t serve its intended purpose.
Limited Power of Attorney
A limited power of attorney is similar to a non-durable power of attorney in that it only takes effect for a single, specified transaction. The agent in a limited power of attorney may only act on behalf of the principal in the way that’s specified in the document.
Creating Your Power of Attorney
One or multiple powers of attorney are important to any comprehensive estate plan. Unexpected events and injuries can happen at any time, and it’s wise to legally ensure that your affairs are in good hands. Additionally, as the principal, be sure to choose your agent(s) carefully. The agent designated in a power of attorney can hold significant power over your affairs while you’re incapacitated. He or she needs to be a trusted and knowledgeable individual to provide the peace of mind that your power of attorney will function as expected.