01 Oct 5 Types Of A Power Of Attorney – How Do I Trust Thee? Let Me Count The Ways
A common misconception is that there is one type of power that covers everything from financial to medical decisions. Even many who realize there should be different documents for medical and financial decisions, they are unaware of the variety of financial powers of attorney. The amount of power given and when the authority can be utilized by the agent often depends on the level of trust that the principal (the one who is giving the power) has in the agent.
A power of attorney is a legal document usually giving someone else (the agent) the authority to act for you during you lifetime when you are unable to act. A power of attorney terminates at death.
The 5 different types of a power of attorney are as follows:
1. Medical Power of Attorney
A medical power of attorney is a legal document that empowers someone else (the agent) to make medical decisions for you if you can’t make the decision due to your condition as determined by a medical professional. Of course, if you are able to make your own medical decisions, then you should be the one making decisions. Often it is difficult to determine when you no longer have sufficient mental capacity.
The agent you trust to make medical decisions may differ from who you trust to make financial decisions. This could result in a conflict. For example, the agent for medical decisions may think the principal needs around-the-clock care, but the agent for financial decisions may be unwilling to pay for the care. However, it is critical that you choose the person you trust to make decisions for you if you are unable to make those decisions since your health and life may depend on it.
2. General Power of Attorney
A general power of attorney is a document that grants someone else to act for you during your life in connection with financial matters. The general power of attorney is often broad in scope. However, the document can vary on what powers are given. Most unwittingly think a general power of attorney covers any and every financial matter. Under Texas law, certain powers must be added to the document for that power to be effective. For example, the power to create or amend a trust is not permitted of the agent unless the power is specifically mentioned in the document. Of course, the principal will need to trust the agent in granting powers that could potentially change the estate plan. If you own a joint interest in real estate, then the joint owner doesn’t have the right to act for the principal unless the joint owner is the agent (with the authority to handle real estate transactions) or is the guardian of the estate. If acting as an agent in connection with real estate, the power of attorney document should be recorded in the county where the property is located. The general power of attorney is often effective immediately (unless the document indicates it is springing as described below). A general may not be effective upon the principal’s disability unless durable language is provided, as described below.
3. Springing Power of Attorney
A springing power of attorney could either be a general or limited power of attorney that gives the agent the authority only when the principal lacks sufficient mental capacity as determined by a medical professional. In Texas, the statutory durable power of attorney gives the option to be effective immediately or spring upon at the principal’s lack of mental capacity. If the principal trusts the agent, then it is often recommended that the authority be effective immediately instead of springing upon disability.
4. General Durable Power of Attorney
Most people prefer a general durable power of attorney, which is often broad in power and effective even during the disability of the principal. Texas has a statutory durable power that gives the option for the general durable power of attorney to be effective immediately or spring upon disability (and good during disability). As long as the principal has mental capacity, the principal can revoke the document. Although Texas has a general durable power of attorney form that is broad in scope, there are numerous “hot” and additional powers that the Texas statutory durable power of attorney does not provide. This could range from allowing your agent to pick someone else to act if he or she no longer desires or is unable to act to the ability to create or amend a trust or to permit the agent to have the ability to make gifts which is often important in public benefits planning. Allowing “hot” and other additional powers requires ultimate trust in your agent.
5. Limited Power of Attorney
In the event the principal wants to limit the agent to a particular power or powers (i.e., sell real estate), the principal can limit the powers or powers to be granted.
A power of attorney is a staple of estate planning. It is up to you to decide when the powers will be granted and when they will be effective. The person to be chosen as your agent should be someone you trust. To be trusted may be a greater compliment than being loved.
How much will you trust your agent?
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