If you are unable to handle your affairs for any reason, you may have to give authority to someone else who can handle your important affairs as well as make decisions on your behalf. You can do this with the help of a power of attorney, which is a legal document that allows you to appoint an individual or organisation to act on your behalf.
The person authorising someone else to act on their behalf is known as the grantor, principal, or donor of the power. The company or individual acting on behalf of the grantor is referred to as the agent, attorney, or attorney-in-fact.
Types of power of attorney
Not every POA (power of attorney) is created equal. There are different POAs, with each one giving the agent different levels of control.
The type of POA that you choose will depend on the type of decisions permitted under the legal document, as well as the situation. The following are the main types of power of attorney that are commonly used:
1. General Power of Attorney
This type of POA gives the agent broad powers or generalised authorisation to act on your behalf. The person or company that you choose to represent you can enter contracts, buy life insurance, employ professional help, settle claims, or do anything else that entails managing your affairs.
This type of POA is, in the majority of cases, used in estate plans to ensure effective handling of financial matters.
2. Special power of attorney
Also known as the limited power of attorney, this type of POA determines what your agent can and cannot do on your behalf. As such, you have to be as specific as you possibly can, to avoid a case in which the agent you chose tackles matters that may not have been in your wish list.
If you’re not sure about what you should include in your limited power of attorney, it’s recommended that you consult with your lawyer before making any decision.
3. Durable power of attorney
POAs are typically effective for a given period. This is especially common for non-durable or enduring POAs which end upon cancellation or expiration of the effective period.
There are cases, however, when the principal becomes mentally incapacitated to make decisions or communicate their wishes, despite having a POA in effect.
A durable power of attorney can, for example, give your spouse the power to make decisions on your behalf. To prepare for such events, one can sign a durable power of attorney to keep their current POA in effect.
If you’ve signed such a POA, you can specify that it shouldn’t go into effect until certain conditions are met. You should ensure that you’ve taken your time to not only understand how the POA is going to work, but also choose an agent that you can trust.
We hope that our blog has been helpful if you have any questions contact us on 01865 487 136 or alternatively head over to our contact page to fill in our online enquiry form.
