A Power of Attorney (POA) is a legal document that allows you (the “Principal”) to grant another person (the “Agent”) the authority to act on your behalf in legal matters and transactions. The extent of the authority granted to an Agent in a POA depends on the type of Power of Attorney executed by the Principal.
There are two basic types of Powers of Attorney, general and limited. A general POA grants your Agent almost unlimited power to act on your behalf. This means that your Agent may be able to do things such as withdraw funds from your financial accounts, sell property and assets owned by you, and even enter into contracts in your name. If you choose to give someone the authority granted in a general POA, you should assume that your Agent will have virtually unfettered control over your assets. Knowing that, you should exercise extreme caution when executing a general Power of Attorney and choose your Agent wisely.
The other type of POA is a “limited” POA which only grants to your Agent the limited, and specific, authority outlined in the POA. For example, you might grant an Agent the specific authority to sell your vehicle for you while you are out of the country for a month. Parents with young children also frequently make use of a limited POA as a way to grant a caregiver the authority to consent to medical care for a child should an emergency arise while the parents are away.
The concept of a durable Power of Attorney evolved because of a need to address a perplexing problem found in a traditional POA. The problem stemmed from the fact that the authority granted to an Agent in any POA automatically terminated upon the death or incapacity of the Principal. The problem with that was that the possibility of becoming incapacitated was often the primary motivation for executing a POA in the first place. If your goal in creating the Power of Attorney is to ensure that the person you name as your Agent has the authority to act on your behalf if you suffer a period of incapacity, but that authority automatically terminates when you become incapacitated, the POA is effectively worthless. From this conundrum sprang the “durable” POA. Making a POA durable allows an Agent’s authority to survive a Principal’s incapacity.
Either a general or a limited POA can be a springing POA. A springing POA has special language in it that causes the Agent’s authority to “spring” into action at a specific time or upon the occurrence of a specific event. For example, you might create a springing POA that is triggered by your absence from the state for more than 30 days or by a declaration of incapacity made by a physician. If the event occurs, your Agent’s authority “springs” into action. If the event never transpires, the Agent’s authority is never activated.
Although the authority granted in a Power of Attorney is well established by law, it is not uncommon for a third party to refuse to honor that authority nonetheless. A common reason for refusing to honor an Agent’s authority is claiming that the POA was executed too long ago. A third party may also question the authenticity of the document or refuse to honor a POA unless it is created using their form. None of these are valid legal reasons to refuse to honor an Agent’s authority; however, sometimes it is easier to try and work with a third party than to litigate the issue.
Even a general Power of Attorney has limits. Exactly what those limits are will depend on the state; however, most states prohibit an Agent from self-dealing, making gifts in the Principal’s name, and making health care decisions for the Principal.
Not to worry – you can delegate the authority to make health care decisions for you to a chosen loved one; however, you must execute a different type of document known as an “advance directive.” State law also governs which advanced directives are recognized within the state. In Illinois, an advance directive known as a Medical Power of Attorney gives the person you name as your Agent the authority to make any and all health care decisions for you in accordance with your wishes, including your religious and moral beliefs, when you are no longer capable of making them yourself. Similar to a general POA, you can give your Agent as much authority as allowable under the law or you can limit that authority.