When you grant someone a power of attorney, you trust that person with the authority to act on your behalf and to represent you and your wishes. There are numerous versions of power of attorney (POA) grants, and the topic can be a bit confusing. Let’s outline the variations and consider which options may suit your needs.
Perhaps the most common type of POA today is a medical power of attorney, sometimes called a healthcare proxy or an advanced directive. Most people should designate someone as their medical POA to act on their behalf when they can’t act for themselves. A medical power of attorney is usually classified as durable, which means that the agent retains the granted authority until the principal dies.
This type of POA grant is usually springing, which means that it does not become active when the grant is made. Instead, the POA goes into effect when the principal is incapacitated, either mentally or physically. This kind of POA grant is also sometimes called an emergency POA.
A springing healthcare proxy can be durable. For example, the POA might cover business matters while the grantor is capable and then transform into a healthcare authority when the principal cannot make their own decisions.
On the other hand, a limited POA would take effect when made and terminate when the grantor becomes incapacitated. The limited POA is not created for healthcare and medical decisions but instead is designed to allow the agent to represent the grantor in financial and business matters.
Can a POA do everything I can do?
It's unlikely that a POA would have the authority to act on a principal's behalf in every matter, but such grants can be wide-ranging. However, some are very limited. The grantor should clearly express their intentions in the POA document. Also, some actions are prohibited for POAs:
- The POA can’t represent the principal in a marriage ceremony.
- The POA may not transfer the principal’s money or assets to themselves.
- The POA may not transfer the POA to someone else.
- The POA may not change the principal’s will.
- The POA may not act on behalf of the principal after the principal has died.
Also, the person granted POA has a fiduciary duty to act in the grantor’s best interests.
How are the terms established?
The POA should indicate the type of authority being shared as well as the length. For example, if you need someone to represent you in a few business situations over the course of a month, you could make the POA expire at the end of the anticipated need. You can also revoke or change a POA designation at any time as long as you are still competent to do so.
If a POA is deemed durable, it will continue until the principal dies unless the granting document contains an end date. If the POA is limited, it ends when the principal dies or becomes incapacitated.
This material is for general information and educational purposes only. Information is based on data gathered from what we believe are reliable sources. It is not guaranteed as to accuracy, does not purport to be complete and is not intended to be used as a primary basis for investment decisions. It should also not be construed as advice meeting the particular investment needs of any investor.
Realized does not provide tax or legal advice. This material is not a substitute for seeking the advice of a qualified professional for your individual situation.
