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What You Need to Know before You Execute a Power of Attorney

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One of the most used estate planning tools is a Power of Attorney, or POA. Most people, at some point in their life, either create a POA or act as an Agent under a POA created by someone else. That also means that the power granted in a Power of Attorney is frequently abused. This often happens because the person creating the POA does not truly understand the power and authority conveyed in the document. With that in mind, the Essex Junction estate planning attorneys at Unsworth LaPlante, PLLC explain what you need to know before you execute a 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. 

Understanding the Authority Granted in a General vs. Limited Power of Attorney

A Power of Attorney can be a general or limited POA. 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 never give someone a general POA if you have any doubt about their trustworthiness. 

A limited POA, however, 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 represent you at the closing for a home you purchase because you will not be available to attend.  Parents with minor children also frequently use a limited POA to grant a caregiver the authority to consent to medical care for their children in the event of an emergency.

What Is a Durable Power of Attorney?

Another important distinction is the difference between a traditional and a durable Power of Attorney. Historically, the authority granted to an Agent in a POA automatically terminated upon the death or incapacity of the Principal. The possibility of becoming incapacitated, however, is a common motivation for executing a POA.  In other words, many people 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. That doesn’t work, however, if the POA terminates upon the incapacity of the Principal. 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. You can make almost any POA durable by including the correct language in the POA document.

What Is a Springing Power of Attorney?

Yet another type of Power of Attorney is a Springing POA. Both a general and a limited POA can be a Springing POA. A Springing POA 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 take effect unless you have been declared incapacitated by a physician or no one has been able to contact/communicate with you for a specific amount of time.

Contact Essex Junction Estate Planning Attorneys

For more information, please attend one of our upcoming FREE webinars. If you have questions or concerns regarding a Power of Attorney you wish to create and/or execute, contact the experienced Essex Junction estate planning attorneys at Unsworth LaPlante, PLLC by calling 802-879-7133 to schedule your appointment today.

Stephen Unsworth
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