Types of Power of Attorney
There are two key types of Power of Attorney (POA), one with general powers and one with limited powers.
A general Power of Attorney allows the agent to act on behalf of the principal in matters, as allowed by state laws. The agent under such an agreement may be authorized to handle bank accounts, sign checks, sell property, manage assets, and file taxes for the principal.
A limited Power of Attorney gives the agent the power to act on behalf of the principal in specific matters or events. It might explicitly state that the agent is only allowed to manage the principal's retirement accounts. A limited POA may be in effect for a specified period. For example, if the principal will be out of the country for two years, the authorization might be effective only for that period.
Additional Types of Power of Attorney
Durable Power of Attorney (DPOA)
The durable Power of Attorney (DPOA) remains in control of certain legal, property, or financial matters specifically spelled out in the agreement, even after the principal becomes mentally incapacitated. While a DPOA can pay medical bills on behalf of the principal, the durable agent cannot make decisions related to the principal's health (e.g., taking the principal off life support is not up to a DPOA).
Healthcare Power of Attorney (HCPA)
The principal can sign a durable Power of Attorney for health care, or healthcare Power of Attorney (HCPA) if they want an agent to have the power to make health-related decisions. This document is also called a healthcare proxy, (we detail the healthcare proxy under the section of this website called Advanced Directives), outlines the principal's consent to give the agent POA privileges in the event of an unfortunate medical condition. The POA for healthcare is legally bound to oversee medical decisions on behalf of the principal.
Financial Power of Attorney
Another type of DPOA is the durable POA for finances, or simply a financial power of attorney. This document allows an agent to manage the business and financial affairs of the principal (you) such as filing tax returns, mailing, and depositing Social Security Checks, and managing investment accounts, in the event, the latter becomes unable to understand or make decisions. To the extent of what the agreement spells out as the agent's responsibility, the agent must carry out the principal's wishes to the best of their ability.
When the agent acts on behalf of the principal by making investment decisions through a broker or medical decisions through a healthcare professional, both institutions would ask to see the DPOA. Although the DPOA for both medical and financial matters can be one document, it is good to have separate POA documents for healthcare and finances.
Since the DPOA for healthcare will have the principal's personal medical information, it would be inappropriate for the broker to have it, and the medical professionals don't need to know the financial status of their patient either.
The conditions for which a DPOA may become active are setup in a document called the springing Power of Attorney. The springing POA defines the kind of event or level of incapacitation that should occur before the DPOA springs into effect. A POA can remain dormant until a negative health occurrence activates it to a DPOA.
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