A power of attorney (POA) is a document that gives someone the legal right to make decisions for someone else. The individual with a power of attorney is the agent, while the individual allowing a power of attorney is the principal.
However, POAs have various forms and limitations. For a comprehensive guide to how POAs function, you can read this document by the Consumer Financial Protection Bureau. However, if you want a brief description of different types of POAs, see below.
General power of attorney
General POAs are beneficial for individuals who no longer wish to oversee the general operation of their various affairs. There are multiple reasons why someone might want to invoke a general POA. In doing so, the principle gives their agent broad rights to manage their affairs for a given amount of time. Typically, the rights terminate in the event of incapacitation. However, durable POAs continue after a principle no longer can make their own decisions.
Limited power of attorney
Limited POAs give agents the right to handle specific tasks. Individuals might wish someone else to manage their bills, business or other financial decisions. Limited POAs usually terminate after a specified amount of time.
Medical power of attorney
Medical POAs cover health care decisions if the principal becomes incapacitated. For a medical POA to be valid, the principal must express their wishes before becoming incapacitated.
POAs are useful for estate planning and administration. If you or a parent are close to retirement, you may want to consider creating a power of attorney. Waiting for too long might lead to the mismanagement of your estate when you can no longer make your own decisions.
