By: Barry E. Haimo, Esq.
February 23, 2016
What’s a Limited Power of Attorney?
A Power of Attorney is a legal document that allows someone else to act on your behalf if you become incapacitated or are unavailable to perform an activity. It is one of many important documents in your over all basic estate plan. Click here for more information on Estate Planning 101. While not a necessity, creating a Power of Attorney can be especially useful in a number of situations, giving someone legal permission to make financial decisions on your behalf.
Depending on your personal circumstances and why you are preparing a Power of Attorney, you – the principal – can grant another person – the agent or attorney-in-fact – powers as broad or limited as you desire.
General vs. Limited
A General Power of Attorney gives your agent broad powers, which generally means that he or she can perform practically any legal act on the principal’s behalf. When writing this type of document, a list of the specific types of actions the agent is permitted to do must be included in order to ensure the agent is acting within his or her legal power.
You can authorize your agent to have access to your bank accounts, sign your contracts, and pay your bills, among other things. But if you don’t want your agent to be able to sell your property, for example, either don’t include that in the Power of Attorney or expressly exclude it to be sure
On the other hand, a Limited Power of Attorney gives someone else the power to act on your behalf for one or more limited purposes. Instead of the broad powers of a General Power of Attorney, a Limited Power of Attorney is used for very specific purposes and actions. A Limited Power of Attorney can also indicate a time frame for how long the agent has the specified power or when the powers will no longer be effective. As the principal, you have control over these particulars.
When Would I Need a Limited Power of Attorney?
A Limited Power of Attorney can be used for a number of occasions where you are unable to be present for an event or action. Here are a few examples of when a Limited Power of Attorney would be useful:
- You become physically disabled and cannot take care of financial or administrative matters on your own.
- You can give someone a Limited Power of Attorney to sign a contract for you on a day when you will be out of town.
- If you have property (house, vehicle, etc.) in another state, you might decide to give someone else the power to sell that property locally since you don’t reside in the area. Thus, the agent’s power is “limited” in time and scope to only selling the property.
- As a financial investor, you may give your portfolio manager a Limited Power of Attorney so they don’t have to continually contact you to approve all decisions.
- You can grant someone the power to handle all of your financial transactions while you’re away on vacation. Although you might be giving someone several powers in this case, they are again limited in time and scope.
There are an unlimited number of circumstances where you might be unable to do something for yourself and need someone else to step up on your behalf. In each case, you will need a power of attorney for them to do so legally.
As you can see, there are many situations when a Limited Power of Attorney can be helpful if you’re unable to act on your own behalf. Because a Power of Attorney gives another person legal authority over your affairs, it’s imperative to have an experienced attorney draft the document to ensure it meets all of your unique and specific needs.
Barry E. Haimo, Esq.
Strategic Planning With Purpose
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