What is a Limited Power of Attorney?

Assigning a power of attorney to someone authorizes that person to act on your behalf. In almost every situation, the Power of Attorney is a notarized document that specifies the breadth of the agent’s authority and the duration.

Limited versus durable power of attorney.

There are numerous available variations for power of attorney designations. One crucial distinction is between a durable assignment and a limited one. A limited POA is also sometimes called a conventional power and typically terminates when the grantor is incapacitated. In this instance, you might designate a limited power of attorney for convenience. For example, if you travel frequently, you may grant a power of attorney to sign documents on your behalf, be present at closings, and otherwise represent your interests.

The limited power of attorney can be very specific or broad, depending on the grantor's needs. You may allow the agent to handle any transaction or allow some and not others. One thing the agent may not do is transfer your assets to themselves.

In contrast, a durable power of attorney designation is intended to remain in place until you die. The agent may represent you in business matters while you are competent and then take over your financial and medical decisions if you are no longer able. A common type of durable power of attorney is a healthcare power or proxy. In this example, the authority could remain inactive until the principal becomes incapacitated, which triggers the activation.

A durable power of attorney can be more broadly based than healthcare and can be immediate or springing. Having this authority established in advance will save time if you cannot make decisions on your behalf.

Amending a power of attorney.

Suppose you have granted a limited power of attorney that allows your agent to represent you for specified business purposes. Because the grant of authority is restricted, it is invalid when you are no longer competent. That provision allows you to revoke or amend the power as long as you remain capable. You may assign a limited power of attorney to a different person than a durable, springing power that you grant to someone you want to make decisions for you when you cannot do so.

For example, you may have a business associate to whom you grant a limited power of attorney so they can represent you in financial matters. However, if you become ill and lack the mental or physical ability to act on your behalf, you likely have someone else to whom the authority should be transferred.

You may designate a family member as your healthcare power of attorney instead of a business associate. In most states, a healthcare proxy designation must be accompanied by detailed instructions regarding your wishes. For example, the form may include your preference for extraordinary medical treatments, resuscitation efforts, and similar choices. The designated agent is responsible for carrying out your wishes. That requirement might influence your choice of agent since you want someone who will be able and willing to abide by your expressed wishes.

When you choose a power of attorney agent to act on your behalf, consider their scope of responsibility, relationship to you, and the likelihood that they will faithfully follow your interests. You can also establish a backup agent if the primary cannot perform the stated functions.