What is the difference between a general and a limited power of attorney?
Powers of attorney come in all shapes and sizes. For the most part they can be tailored to achieve nearly any goal you have. While all powers of attorney permit someone else to stand in the shoes of another person, you will need to decide whether you are looking for a general or a specific power of attorney.
I am an attorney, but I am not your attorney. Nothing in this post creates an attorney-client relationship or should be deemed legal advice. This post is purely educational and informative. Further, this site contains affiliate links from which I may make a commission if you make a purchase.
Power of Attorney definitions
If you don’t already know, let me give you a basic definition of what a power of attorney is. A power of attorney is a document that a person signs (the principal) so that someone else (the agent or attorney in fact) can act on the principal’s behalf. That power of attorney could be for a specific purpose, for a specific time frame, or even for a specific event.
Furthermore, powers of attorney can stretch the length of your adult life or cease to operate at a certain age.
Most commonly, for estate planning purposes, we discuss durable powers of attorney –powers of attorney that endure beyond a person’s competence. However, even those run the gamut of possibility. They can include any number of powers, restrictions, or time restraints.
In any event, however, powers of attorney always die with the principal and do not survive death.
MANY TYPES OF POWERS OF ATTORNEY
Powers of attorney can be tailored to nearly any cirucumstance or purpose. Below are some of the basic types. This might help you determine what fits your cirucumstances best.
1. Limited or Specific Power of Attorney
A limited power of a attorney is a document that appoints an agent for only a specific purpose or a specific time period.
You might be most familiar with a limited power of attorney in the case of real estate closings.
Title companies commonly accept a power of attorney on behalf of a property owner who cannot attend closing. The limited power of attorney includes language that:
- Allows the principal to sell, mortgage, convey, encumber, lease, grant an easement, or any other property transaction,
- Describes the property with legal detail including the legal description, survey, metes and bounds, or other specific description, and
- Appoints a specific end point, which may include the conclusion of the property transaction, the disposition of the property, death, or even a time period.
A Limited Power of Attorney might also be appropriate for specific time periods.
For example, you might want a limited power of attorney for travel. If you plan to vacation abroad and want someone to care for your home and children, then you might only want a POA for a couple of weeks.
If you want someone to be able to make all of your home, financial, and health decisions, then you might be more interested in a general power of attorney.
2. General Power of Attorney
Unlike a limited power of attorney, a general power of attorney does not limit time or powers. For the most part, a general power of attorney allows the agent to do anything and everything that the principal can do.
If the principal could balance his or her own checkbook, vote shares at a business meeting, purchase property, or make medical decisions, then the general attorney in fact can too.
You might be wondering why anyone would want to use a general power of attorney when he or she can make his or her own decisions.
However, consider the busy entrepreneur who jet-sets around the world making business decisions. He or she likely still needs someone to keep affairs at home running smoothly.
Someone needs to pay the bills, to collect medical information, to hire a housekeeper, etc. General powers of attorney allow the attorney-in-fact to stand in the shoes of the principal. The agent can then enter into contracts, manage affairs, and make business decisions when the principal is not able to do so.
The general power of attorney does not take power out of the principal’s hands. Instead, it takes the power and adds another responsible caretaker.
Unlike a durable power of attorney, however, the most important distinction for a general power of attorney is that it also ceases at incapacity.
As I mentioned above, the general power of attorney allows an agent to do anything and everything that the principal can do. Thus, if the principal is no longer able to make decisions, contract, buy, sell, appoint medical personnel…, then the attorney in fact under a general power of attorney can no longer do those things either.
Instead, what that person needs is a DURABLE power of attorney.
3. Durable Power of Attorney
Up until relatively recently, general powers of attorney were the best that the law allowed. If you wanted to appoint someone to make decisions on another’s behalf after incapacity, then the court would have to do it.
However, over the last few decades, every state in the USA has adopted a Durable Power of Attorney law.
The purpose of a durable power of attorney in contrast to a general power of attorney is that the powers of the agent endure beyond the principal’s incapacity.
Even when the principal is no longer mentally competent to make his or her own decisions, the durable power of attorney appoints the responsible agent to stand in the shoes of the principal.
Every adult and especially parents need a durable power of attorney.
(Related posts: Why a power of attorney is the most important piece of your estate plan. OR The documents that every parent needs before having a baby.)
However, even among durable powers of attorney there are different types. Most durable powers of attorney fall into 2 types: 1. Springing or 2. Immediately Effective.
SPRINGING DURABLE POWER OF ATTORNEY
A springing durable power of attorney is likely the type of power of attorney that pops into your mind when you hear the words “power of attorney.”
A springing durable power of attorney is signed by a principal when he or she is completely competent to make his or her own decisions. Then, if he or she becomes incompetent (gets into a car accident, develops a neural disease, etc), the power of attorney springs to life.
When the durable POA springs to life, the agent or attorney in fact then has the right to stand in the principal’s shoes in accordance with the terms of the document.
The POA may give every power from retirement decisions to HIPAA rights. Or, the POA might limit those rights and responsibilities to solely business, property, or health decisions.
The durable power of attorney is endlessly customizable, and having a reputable attorney review its terms with you is extremely important.
IMMEDIATELY EFFECTIVE DURABLE POWER OF ATTORNEY
Other durable powers of attorney are signed and made immediately effective. This means that the agent or attorney in fact has the right to not only make decisions upon the incapacity of the principal but can also start at the point of signing.
If mom is still able to make all of her own financial decisions but doesn’t want to, she might go ahead and appoint her daughter to start managing her bank account for her.
If dad is in business with his son and they are both intimately acquainted with the books, numbers, contracts, and direction of the company, dad might go ahead and allow son to make decisions now and after his incapacity.
For some an immediately effective durable power of attorney makes sense for their lifestyle and the profile of their family.
Again, consult with an attorney to determine whether you are best suited for a springing or immediately effective power of attorney.
WHICH TYPE OF POWER OF ATTORNEY IS RIGHT FOR YOU?
The laws of powers of attorney fill volumes. Powers of attorney are varied, endlessly customizable, and can be tailored to fit the needs of any person.
Therefore, don’t accept any one-size-fits-all power of attorney from a book or website.
Instead, take the time to understand from a reputable attorney in your jurisdiction what the laws of your state are with regard to powers of attorney.
Consider whether you are looking for a power of attorney for a specific or limited purpose. Think about whether you want someone to help you with decisions now or just later.
But, by all means, you should have a power of attorney TODAY to fit your needs and wishes.
(To read more about important considerations for choosing an attorney in fact or agent, click here.)