At some point in your life you will likely have a need to create and execute a power of attorney. A power of attorney can be a very useful legal document; however, it can also be misused by people who have less than honorable intentions. For this reason, it is crucial that you understand what a power of attorney does, and does not do, as well as have a basic understanding of the various different types of power of attorneys that can be created. Specifically, it is very important to know the difference between a general and a limited power of attorney.
A power of attorney is a legal document that allows you (the “principal”) to give legal authority to act on your behalf to another person (the “agent”). When you give someone power of attorney you do not give up your rights to act on your own behalf. Instead, you simply give another person the same rights that you have. If you execute a general power of attorney you give the agent a wide range of power. In fact, a truly general power of attorney gives your agent the right to act on your behalf in almost all areas of your life. With a general power of attorney your agent could sell your vehicle or even your home. Your agent could withdraw funds from your bank account, make investment decisions, or even enter into a contract in your name. The important point to remember is that a general power of attorney should only be given to someone very close to you whom you trust completely because of the risk of abuse that goes along with giving an agent general power of attorney authority.
A limited power of attorney, on the other hand, only gives your agent specific powers or authority. You might, for example, need someone to represent you at the closing on your home because you are planning to be away for business. In that case, you could give someone a limited power of attorney that gave the agent only the authority to sign your name on the closing documents. Or you might want to give someone a limited power of attorney to consent to medical treatment for your minor children while you are away on vacation. Often, along with limiting the scope of the authority that you grant a limited power of attorney is also only good for a specific period of time, further limiting the power granted by you.
If someone asks you to give them power of attorney for any reason, consult with your estate planning attorney before signing the document to be sure you understand what authority you are actually giving away to the proposed agent.
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