A Power of Attorney (POA) is one of the most common tools used in estate planning as well as in other areas of the law. As such, there is a very good chance that you will have a need for a POA at some point during your life. Deciding which type of POA you need is the key to creating and executing the correct document. Given the authority that can be granted in a POA, you should always work with your estate planning attorney during the creation and execution of a power of attorney. It may be beneficial, however, to familiarize yourself with the various types available. Toward that end, the Hartford estate planning attorneys at Nirenstein, Horowitz & Associates, P.C. explain each type of power of attorney.
What Is a Power of Attorney?
At its most basic, a Power of Attorney is a legal document that allows you (referred to as the “Principal”) to grant another person (the “Agent”) the authority to act on your behalf in legal matters and transactions. The type and extent of the legal authority you grant to an Agent depends on the type of POA you create. This is precisely where problems often occur when using a POA – the Principal grants too much authority or fails to grant enough authority to the Agent.
Never Grant More Authority Than Is Necessary
When deciding what type of POA you need, the first consideration is how much authority or power your Agent really needs. The answer to that question will determine whether you need to create a general or limited Power of Attorney. When deciding between a general and limited POA, consider who the Agent is and whether a limited POA is sufficient to accomplish your goal. Never use a general POA when a limited POA will accomplish your objective.
- General Power of Attorney — the authority you grant in a Power of Attorney can be general or limited. A general POA grants your Agent almost unfettered power to act on your behalf in legal matters. Consequently, your Agent may be able to do things such as withdraw funds from your financial accounts, sell or encumber property and assets owned by you, and even enter into contracts in your name. Although the law places some limits on the actions of an Agent with a general POA, you should operate under the assumption that an Agent can do anything you can do once granted a general POA. Given the sweeping power granted to an Agent under a general POA, they are usually only used by spouses, a parent and adult child, or other familial type relationships.
- Limited Power of Attorney — a limited POA only grants to your Agent the limited, and specific, authority enumerated in the POA. For example, you might grant an Agent the limited power of attorney to sell a boat you have listed for sale while you are out of the state for several weeks. Another common use for a limited POA is granting a caregiver the authority to consent to medical care for a minor child while the parent is away.
Springing and Durable Power of Attorney
Once you have decided to create a general or limited POA, you can then make that POA a springing or a durable power of attorney.
- Springing Power of Attorney – a Springing POA is a POA that has special language in it that causes the Agent’s authority to “spring” into action at a specific time or upon the occurrence of a specific event. For example, you might create a general POA that does not actually go into effect until you are outside the continental United States for more than 24 hours. A Springing POA is also often used as an incapacity planning tool by making the incapacity of the Principal the “event” that causes the Agent’s authority to activate. While a Springing POA can be used as an incapacity planning tool, there are drawbacks to using a POA in this manner.
- Durable Power of Attorney – for a long time, the authority granted to an Agent automatically terminated upon the death or incapacity of the Principal. The problem was that the possibility of becoming incapacitated is precisely why many people want to grant someone POA. People frequently create a POA specifically to ensure that their Agent named in the POA has the authority to act on their behalf if they suffer a period of incapacity. If the POA terminates upon the incapacity of the Principal, however, it cannot help in the event of the Principal’s incapacity. To resolve this problem, the concept of a “durable” POA evolved. When a POA is made durable it simply means that the Agent’s authority survives the incapacity of the Principal. When deciding if your POA should be durable, keep in mind that a traditional POA can be revoked by you at any time. If you become incapacitated, however, you will not have the ability to revoke your Agent’s authority under a durable POA. Just as with a general POA, consider who your Agent is and how much trust you have in him/her before deciding to make your POA durable.
Do You Want to Grant the Authority to Make Health Care Decisions?
One of the most common limits placed on an Agent under a general Power of Attorney is the right to make health care decisions for the Principal. In most states, you must execute a specific type of document, referred to as an “advance directive,” to grant someone the authority to make decisions relating to your medical care and treatment. In Connecticut, you must execute an advance directive known as an “Appointment of Health Care Representative” in order to appoint someone to make health care decisions for you if you are unable to make them yourself.
Contact Hartford Estate Planning Attorneys
For more information, please download our FREE estate planning worksheet. If you have additional questions or concerns about which type of power of attorney is right for you, contact the experienced Hartford estate planning attorneys at Nirenstein, Horowitz & Associates, P.C. by calling (860) 548-1000 to schedule an appointment.
Mr. Nirenstein is licensed to practice before the courts of the State of Connecticut and the United States District Court. He is a member of the Connecticut and Hartford County Bar Associations, and the Estate and Probate, Elder Law, Business Law and Real Estate Sections of the Connecticut Bar Association.
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