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Do You Know the Differences Between the Types of Powers of Attorney?

Do You Know the Differences Between the Types of Powers of Attorney?

A power of attorney is a legal contract that authorizes someone to act on behalf of another. The person designated to act is known as the agent or attorney-in-fact and has a fiduciary duty to act in the best interests of the other. The other person is known as the principal.

Your financial or medical care could be hindered without the proper power of attorney documents in place. Third parties are reluctant to take direction from those who do not have the legal authority to make decisions on your behalf.

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Types of Powers of Attorney

General Power of Attorney (Non-Durable)

  • Authorizes the agent to perform almost any task on behalf of the principal. For example, open financial accounts, manage personal finances, execute contracts, etc. Most general powers of attorney are designed to cover all “financial” matters and are referred to as financial powers of attorney.
  • Definitionally, a general power of attorney could allow the agent to perform most anything allowed under state law, including make healthcare decisions. But state laws often provide that a separate “medical power of attorney” with specific provisions be executed in this regard.
  • Terminated upon the incapacitation or death of the principal or if revoked by the principal.

Durable Power of Attorney

  • Includes a provision keeping the authorization in force after the principal is incapacitated. This allows for no gap in action (i.e., bills can continue to be paid without applying for a conservatorship for the principal).

Special or Limited Power of Attorney

  • Only specific powers limited to a particular area are authorized. An example is a power of attorney that grants the agent authority to sell some real estate.

Springing Power of Attorney

  • The provision makes the authorization effective not on the date of execution of the power but on some other event such as upon the principal's incapacitation.

Medical Power of Attorney

  • A medical power of attorney, or advanced directive, allows the principal to authorize an agent to make healthcare decisions on their behalf if they become incapacitated (i.e., when they can no longer provide informed consent). Medical powers generally end upon the principal's death. Organ donation can be procedurally complicated in some states depending on the impact to the principal of the donation.
  • Medical powers of attorney can also be limited (directed) by authorizing only certain care but not other care. For example, one might provide the agent the authority to admit the principal to a “critical care facility” but not a “long-term care facility.”
  • A medical power of attorney is usually designed alongside a Living Will (another form of the advanced directive) where you indicate your personal wishes regarding the care or limitations of care you prefer.

If you have questions on your estate planning specifics, give us a call. We are here to help.

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Biz Tip Topic Expert: Richard Kollauf - JD, CPA, CFP, AEP

Richard Kollauf - JD, CPA, CFP, AEP

Richard is a Principal for SVA Certified Public Accountants and has more than 35 years of experience working in financial, accounting, and legal operations. Richard’s expertise in the multi-faceted financial environment includes business succession planning, tax, investments, finance, mergers and acquisitions, estate planning, and trust administration. He also has experience in estate planning and distribution for complex operational and investment multi-state businesses. Richard provides income tax consulting services to closely-held and family-owned businesses, as well as high net worth individuals.

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