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A power of attorney is a document that lets you, the "principal," choose a trusted person or organization to handle your financial, legal or health care matters if you are unavailable or unable to manage them for yourself. You may designate a person or an organization to act on your behalf. The person or organization you choose is referred to as your "attorney-in-fact" or "agent."

A power of attorney must be signed by the person granting the authority and that person must be mentally competent at the time of the signing in order to make the document legally binding.

Different Types of Powers of Attorney

There are different types of powers of attorney:

• General power of attorney
• Limited power of attorney
• Health care power of attorney

All powers of attorney terminate on the death of the principal.

Additionally, You can revoke or cancel your power of attorney during your life. To revoke your power of attorney, notify your attorney-in-fact in writing that the power of attorney is revoked. Also, notify any person or institution where your attorney-in-fact has been used of the revocation. Another way of revoking your power of attorney is to specify in the power of attorney document that it expires on a certain date.

General Power of Attorney

A general power of attorney authorizes your attorney-in-fact to act on your behalf in a variety of different situations. A general power of attorney is usually used to allow your attorney-in-fact to handle all of your affairs when you are unable to handle them. For example, when you are traveling or when you are physically or mentally unable to handle your affairs.

A general power of attorney is commonly used to allow another person to handle the following types of transactions for you:

• Banking transactions
• Entering safety deposit boxes
• Buying and selling property
• Purchasing life insurance
• Settling claims
• Entering into contracts
• Exercising stock rights
• Buying, managing or selling real estate
• Filing tax returns
• Handling matters related to government benefits

Limited Power of Attorney

A limited power of attorney, sometimes referred to as a special power of attorney, authorizes your attorney-in-fact to act on your behalf only in specific situations. A limited power of attorney allows you to give only specific powers to the person or organization you appoint as your attorney-in-fact. For example, you could authorize someone to sell a specific item for you, such as a house.

Health Care Power of Attorney

A health care power of attorney allows you to appoint someone to make health care decisions for you. A health care power of attorney is different from a living will, which only allows you to express your wishes concerning life-sustaining procedures.

Having a health care power of attorney does not eliminate your right to give medical direction to physicians and other health care providers when you are able to do so. A health care power of attorney only becomes effective when you do not have the capacity to give, withdraw or withhold informed consent regarding your health care.

Durable

Unless a power of attorney is made "durable" by specific language added to the document, an attorney-in-fact can only exercise a power that the principal is also capable of exercising. This prevents an attorney in fact from acting when the principal is incapacitated. For example, if you are in a coma, then you can't sign a contract and your attorney-in-fact can't sign a contract on your behalf either.

All of the types of powers of attorney can be made durable. A durable power of attorney, whether it is general, limited or for health care, allows the attorney-in-fact to exercise the powers that were granted by the principal even after the principal becomes disabled. However, a disability does not have to occur in order for this power to be in effect.

This kind of power of attorney takes effect immediately. Therefore, it's possible, in theory, for the attorney-in-fact to act independently behind your back even if you're healthy. Most likely, your attorney-in-fact is trustworthy beyond reproach. However, if there is any doubt about this, then the durable power of attorney is may not be for you.

Springing

An alternative to creating a durable power of attorney is a springing power of attorney. The power granted under this designation does not come into effect until you become disabled.

There must be a formal determination of disability before the power of attorney can be accepted and used. A springing power might require that two doctors examine you and confirm that you are disabled. A springing power of attorney may pose as a problem in some cases because there might be a disagreement over the degree of your disability. This can cause delay in the attorney in fact acting for your benefit and may become expensive if the matter eventually ends up in court.

The springing power of attorney is used because some people just feel uncomfortable making a delegation of power today, while still healthy. While that sentiment is quite understandable, the potential problems should be considered, too.

What Should a Power of Attorney Include?

In addition to the powers above, discuss with your lawyer whether to include the following provisions in your power of attorney:

• Power to handle tax matters and deal with the IRS
• Power to handle retirement accounts and investments
• A compensation clause detailing how much your attorney-in-fact should be paid and where the payment should come from
• Power to make gifts. If you want to initiate or continue a gifting program, you may want to spell out the specific power.
• Power to create and amend trusts for your benefit. This allows flexibility in implementing an estate plan, despite your incapacity. It can be particularly useful in some situations, since a power of attorney can't authorize an attorney-in-fact to write your will.

Although blank power of attorney forms are readily available, this is a document best prepared by an attorney. Experience shows that the one page, fill-in-the-blank form will simply not be acceptable if the attorney-in-fact is engaging in a transaction involving much money. That is especially so when there are any questions about mental capacity.

Questions for Your Attorney

• Do I need to choose an attorney to be my attorney-in-fact in my power of attorney document?
• Does an attorney-in-fact get paid for fulfilling power of attorney duties?
• What happens if the person I selected doesn't want to serve as my attorney-in-fact?
• Is a springing or a durable power of attorney the better choice?

Related Resources on Lawyers.com^sm

- Durable Power of Attorney for Health Care
- Interpreting the Language of a Power of Attorney
- Living Wills
- Necessary Will Provisions
- Elder Law: Selecting a Good Lawyer
- Visit the Estates, Wills & Probate Message Board for more help