A Power of Attorney is one of the most used estate planning tools. At some point in your life, you will likely execute a Power of Attorney and/or be named as an Agent under someone else’s Power of Attorney. While you may be familiar with the concept of a Power of Attorney, you may not know everything that you need to know about how one works. With that in mind, an Indianapolis estate planning attorney at Frank & Kraft discusses what you need to know before executing a Power of Attorney.
What Is a Power of Attorney?
A power of attorney, or POA, is a legal document that allows the creator (referred to as the “Principal”) to grant another person (the “Agent”) the legal authority to act on his/her behalf. The type and extent of the legal authority granted to an Agent depends on the type of POA executed.
Are There Different Types of Powers of Attorney?
What many people fail to realize is that all POAs are not created equal. In fact, there are several different types of Powers of Attorney. Understanding which type of POA is right for your specific needs is crucial to executing the right document and having it work as expected. Some common types of POAs include:
- General Power of Attorney: This grants the Agent broad authority to act on behalf of the Principal with few restrictions. An Agent with general POA can do things such as enter into contracts in your name, conduct financial transactions on your behalf, and sell assets owned by you. Be sure you understand the authority you are granting someone before executing a general POA. Because the authority granted to an Agent under a POA is governed by state law, be sure that you understand the limitations that state law places on a general POA if you are appointed as an Agent to avoid unintentionally exceeding your authority.
- Limited (or Special) Power of Attorney: A limited POA “limits” the Agent’s authority to specific tasks or time frame. For example, the Principal might grant the Agent the authority to negotiate the sale of a vehicle while the Principal is out of town. Parents with minor children also frequently execute a limited POA to give a caregiver legal authority to act in an emergency while the parents are away.
- Durable Power of Attorney: A traditional POA automatically terminates upon the death or incapacity of the Principal. The “incapacity” limitation of a traditional POA gave rise to the durable POA. Making a Power of Attorney durable means that the authority granted to the Agent survives the incapacity of the Principal. Indiana law presumes that a POA is durable unless the document specifically states that it is not intended to survive the incapacity of the Principal. Therefore, if you do not want your POA to be durable, you must say so within the document.
- Springing Power of Attorney: A “springing” Power of Attorney gives the Agent the power to act for the Principal only after a certain event occurs, such as when the Principal cannot be located for a designated period of time or becomes incapacitated.
- Medical Power of Attorney: Referred to by various names, such as a Healthcare Power of Attorney, Health Care Proxy, and Healthcare Surrogate, this type of POA allows the Agent to make medical decisions on behalf of the Principal if the Principal cannot make or communicate decisions.
Can We Help You Choose the Right Type of Power of Attorney for Your Needs?
For more information, please download our FREE estate planning worksheet. If you have additional questions or concerns about creating a Power of Attorney, contact an experienced Indianapolis estate planning attorney at Frank & Kraft by calling (317) 684-1100 to schedule an appointment.
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