Powers of Attorney

Understanding the Different Types of Powers of Attorney

A financial power of attorney is an important legal document that should be part of everyone’s estate plan. It is a flexible document that can be created and used in a number of different ways during your life, but it is most often used as part of a comprehensive estate plan.

All financial power of attorney documents have a number of features in common. First, you, the principal, will authorize someone else, the agent, to act on your behalf and with your authority. Second, while the agent can have broad authority to act on your behalf, the agent must act with your best interests in mind. Third, the principal must sign the power of attorney document while he or she is mentally capable of doing so. If the principal is mentally incapacitated, the principal cannot authorize someone to act on their behalf.

When selecting an agent, the principal must choose carefully. Although the agent is legally obligated to act with the principal’s best interests in mind, unfortunately not everyone does so. An unscrupulous agent could take advantage of a broad financial power of attorney and do irreparable harm to the principal by misusing funds or making ill-advised or unwarranted real estate transactions. Agents who violate their duties face serious penalties, including criminal charges for theft or elder abuse. However, it’s best for everyone involved, especially the principal, to avoid this. Selecting an agent who is loyal, thoughtful, and has good financial sense will avoid this trouble down the road.

There are a number of different types of financial power of attorney documents that you can choose from.

Conventional Power of Attorney

A conventional power of attorney begins when the principal signs it, and ends when the principal becomes mentally incapacitated.

This type of power of attorney can be particularly useful for when it becomes difficult for the principal to run errands. It can be much easier for an adult child to take care of the day-to-day financial needs of their older parents, such as depositing checks or paying the mortgage.

However, after the principal becomes mentally incapacitated, the agent has no ability to act for the principal. This can make it difficult for the agent to use the principal’s financial accounts to pay for the principal’s housing or healthcare. With no power of attorney document in place, you will have to seek court-ordered guardianship in order to continue to manage your parents’ financial matters.

Springing Power of Attorney

A springing power of attorney is the opposite of a conventional power of attorney, in that it remains dormant until a specified event occurs. Typically, this is when the principal becomes mentally incapacitated. The principal’s attorney must carefully draft the springing power of attorney document so that it is very clear when the “springing” event, or the prerequisite event takes place that lets the document become effective. If the principal regains their mental capacity, this power of attorney will automatically be revoked.

Durable Power of Attorney

A durable power of attorney is a combination of a conventional and springing power of attorney, in that once signed it takes effect immediately and remains in effect throughout the principal’s lifetime unless the principal revokes it.

Because a durable power of attorney remains in effect both before and after the principal becomes incapacitated, it is the most common type of financial power of attorney. However, estate planning is not a one-size-fits-all solution. Based on your family situation, your attorney may recommend a different type of power of attorney that better fits your needs.

Limited or Non-Durable Power of Attorney

It is also common for people to create limited powers of attorney that are limited in scope, duration, or both. These types of powers of attorneys are typically used earlier in life in a number of situations.

A power of attorney that is limited in scope might be signed that gives a real estate agent authority to accept or reject offers on the principal’s property. The agent would not have authority to act on behalf of the principal in ways not specifically related to the sale of this real estate. The agent could not withdraw funds from the principal’s bank account or make phone calls about the principal’s life insurance policy. This power of attorney can be limited in time as well. Authority can be granted up until the closing of the property, or it can be scheduled to end on a certain date, regardless of whether the house sells.

Similarly, someone who will be traveling overseas for an extended period of time, such as a student on a study abroad semester or a military officer leaving on a tour may decide to create a power of attorney in favor of a parent, spouse, or relative. This power of attorney would be limited to the period of time the principal is abroad, to make it easier to handle financial transactions. It can also be limited in scope. It can authorize the agent to pay bills or discuss student loan details, but deny authority to engage in real estate transactions.

Because power of attorney documents are so flexible, they can be adapted to meet a variety of needs. While they are an important aspect of your comprehensive estate plan, they are also useful in other stages of life.

Guest Post Provided by Sue Sandys. Sue Sandys is an attorney based in Phoenix, Arizona who has practiced law for nearly 30 years. Her first 11 years were spent with the Department of Child Safety, and for the past 18 years she has practiced holistic estate planning. In addition to preparing the legal documents needed for an individual’s estate plan, she believes in finding the best solution for each individual and their families because estate planning is not done in a vacuum. Instead, it is one piece of protecting a client’s family, when the client is no longer able to do so. You can learn more about Sue and her approach to estate planning at https://susansandys.com.


Information above is provided for educational purposes only, and should not be considered as advice. You should consult with a qualified estate planning attorney if you have any questions about this information, and before making any adjustments to your estate plan. Eagle Financial Solutions and Sue Sandys are separate entities and have no affiliation. 


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