What is an Immediate Power of Attorney?

Posted Jan 25, 2023


A power of attorney is a designation that another person has the authority to make decisions on behalf of the power grantor. Typically, you would grant a power of attorney to someone either for convenience or necessity.

For example, you might grant a power of attorney to a close associate if they act on your behalf in a business deal. Giving the ability to buy, sell, or otherwise commit your assets is helpful when someone like a business agent needs to make things happen quickly. Granting this authority doesn't mean you can't decide on your own, so this usage is a matter of convenience. If you have many interests it is helpful for someone you trust to be able to transact on your behalf.

Limited powers or limited duration.

In some cases, the grantor may choose to control the decisions that the person granted a power of attorney can make. In that situation, the POA would be designated as limited and specify the allowable actions. However, in any case, those with a PAO designation are not allowed to transfer the grantor's assets to themselves. POA agents must act using a fiduciary standard, meaning they take the course of action that is best for the grantor.

In contrast, one form of power of attorney is for healthcare. It grants the agent the right to make decisions for you when you can't make them on your own due to physical or mental incapacity. For example, if you grant someone a healthcare power of attorney, they can decide whether you will receive life-saving medical care. Because of the significance of the medical decisions they might make, most healthcare power of attorney designations are accompanied by a medical advance directive that details your wishes in potential health scenarios.

When does a POA go into effect?

Some grants of POA are immediate, while others are contingent on certain circumstances. For example, a healthcare power of attorney would not go into effect until the person making the designation is in need (most likely due to incapacitation). Others may be effective immediately.

Furthermore, the designation of a power of attorney can be durable or non-durable. A durable power of attorney can either be immediate or triggered by incapacitation but stays in effect until the grantor dies. In contrast, a non-durable power of attorney has a specific term or is limited to a particular transaction. One advantage of a durable power is that it is available without delay when something happens to the grantor. On the other hand, if the POA has a trigger (a springing POA), the designated agent may have to demonstrate the need, causing potential tardiness in paying bills or other financial transactions.

Remember that as long as the person granting a power of attorney remains capable, they can revoke or change the designation.

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.

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