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    Home » Incapacity Planning » Which Type of Power of Attorney Is Right for Me?

    Which Type of Power of Attorney Is Right for Me?

    Incapacity Planning

    A Power of Attorney is among the most frequently used of all estate planning documents, due predominantly to the fact that a Power of Attorney (POA) can help accomplish such a wide range of estate planning goals. The pervasive nature of POAs, however, also means that they are frequently misused and abused. Given the nature and purpose of a POA, executing the wrong type of Power of Attorney can be a costly mistake. To help prevent you from making just such a mistake, the Middlesex estate planning attorneys at Augulis Law Firm offer guidance to help you choose the right 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.

    How Much Power Does Your Agent Need?

    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.

    • 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 pout 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.

    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.

    Should Your POA Be Durable?

    Historically, the authority granted to an Agent in a POA 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. You can make both a general and a limited POA durable. 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, including New Jersey, you must execute a specific type of POA to grant someone the authority to make decisions relating to your medical care and treatment. In New Jersey, you must execute an advance directive known as a “New Jersey Proxy Declaration” to appoint someone to make health care decisions for you if you are unable to make them yourself. In essence, a New Jersey Proxy Declaration is a very specific type of durable limited POA.

    Contact Middlesex Estate Planning Attorneys

    For more information, please download our FREE estate planning worksheet. If you have questions or concerns about executing a Power of Attorney, contact the experienced Middlesex estate planning attorneys at Augulis Law Firm by calling 908-222-8803 to schedule your appointment today.

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    About Alan Augulis, Estate Planning Attorney

    Mr. Augulis founded his Warren, New Jersey law firm so that he could focus his practice in the areas of advanced estate planning and tax law. Mr. Augulis has invested considerable time and energy helping to educate others on the topic of estate planning and has become a sought-after speaker in the tax and estate planning arena because of his informative and entertaining seminars.