A Power of Attorney (POA) can be an essential tool in estate planning. Understanding the different types of Powers of Attorney is important in choosing the right instrument to fulfill an individual's particular needs.

A Power of Attorney is a legal document that allows a person (commonly referred to as the "principal") to grant authority to another person (commonly referred to as the "agent", "proxy", or "attorney-in-fact") to make decisions on the principal's behalf. Typically, the Power of Attorney is used for a temporary period of time, which may be particularly beneficial at the end of life. However, a Power of Attorney can be used throughout an individual's life to delegate different responsibilities.

There are 5 main types of Powers of Attorney:

  1. General Power of Attorney: This power authorizes the agent to act for the principal in all situations allowed by local law. It is general and broad in nature, meaning that it can include medical, financial, legal, health, and real estate decisions. The principal should be very careful to choose a trustworthy person to be his or her agent because a general POA affords the agent extensive control. Some individuals choose to use this type of POA only for a short period of time, perhaps during an illness or while they are traveling and are temporarily unable to manage their affairs. Unless it is a durable POA, this type of POA ends if the principal becomes incapacitated or passes away.
  2. Durable Power of Attorney: The durable POA takes effect immediately upon signing and remains effective even if the principal becomes incapacitated. This type of POA is also very general and broad in nature, however, since it continues even if the principal becomes incapacitated, the durable POA is typically used for long-term planning. Similar to the general POA, the durable POA automatically ends upon the death of the principal.
  3. Springing Power of Attorney: This is a conditional Power of Attorney that "springs" into effect when a specified event occurs in the future. In estate planning, a specific medical condition, such as incapacitation, may be the event that causes the springing POA to become effective. When drafting the language for a springing POA, be sure to be very specific about when it is to be used. For instance, if this type of POA is to take effect due to a specific medical condition, then ideally it would need to specify that the principal should be examined by a doctor and the doctor's findings would need to be considered before enacting the springing POA.
  4. Financial Power of Attorney: This is a special or limited power that authorizes the agent to make decisions about the principal's money or property. For example, with this POA, the principal can authorize the agent to pay bills, make bank deposits and withdrawals, sell or rent real estate, file tax returns, collect and manage retirement benefits, and even control a business. The principal can also direct the agent to collect government benefits such as social security on his or her behalf, buy and/or change insurance policies, and take legal action on the principal's behalf.
  5. Medical Power of Attorney: This is a special or limited power of attorney that allows an agent to make healthcare decisions on the principal's behalf. This POA becomes effective immediately upon signing, however, it can only be used if a physician certifies that you lack the capacity to make your own healthcare decisions. This type of POA is important for estate planning and is typically included with the Advance Directive and Living Will. The Medical Power of Attorney allows the principal to appoint an agent to make decisions regarding medical treatments, surgical procedures, artificial hydration and nutrition, organ donation, choice of facilities, release of medical records and end-of-life care. The Advance Directive and Living Will specify the principal's wishes regarding life-sustaining treatments and can include specific instructions, such as "do not resuscitate" (DNR) orders.

There are many instances when Powers of Attorney instruments are beneficial. For instance, in the case of a medical issue or incapacitation, without a Medical Power of Attorney, an agent may need to go to court to gain guardianship or conservatorship to protect the rights of the principal. In some cases, the court may appoint someone not of the principal's choosing. This could be a time-consuming and costly process without any kind of guaranteed outcome. Having a Medical Power of Attorney in place allows the principal control and peace of mind.

While powers of attorney are important instruments for many decisions that need to be made if the principal becomes incapacitated, there are obviously limits. For example, once the principal dies, a POA becomes null and void. In addition, a POA doesn't give an agent authority to distribute assets of an estate to heirs. Keep in mind that a Power of Attorney is just one tool in your comprehensive estate plan. There are several additional documents necessary to ensure that your wishes are carried out, your loved ones are protected, and probate is avoided, if possible. For instance, a Last Will and Testament is needed to designate how assets are distributed after death and a Revocable Living Trust can help avoid probate and ease the transition of assets to your heirs. Having these documents in place as part of your overall plan will help your family avoid any legal complications in the future and assure that your assets will be distributed according to your wishes.