A power of attorney is a legal document that gives someone the authority to act on your behalf. The person who executes the power of attorney is called the “principal.” The person who is given the power to act is called the “agent” or the “attorney in fact.” The most common reasons for executing a power of attorney is to handle someone’s financial affairs or their medical care.
A power of attorney can be a very important estate planning tool. Each power of attorney is different and should be specifically drafted to accomplish your particular purpose. Each power of attorney will have its own terms and limitations, as well. For instance, a power of attorney can be general or specific. As the needs of each family or individual always varies, it is best to discuss your needs with an estate planning attorney to ensure the document is drafted to best meet your specific needs.
Differences between a general and limited power of attorney
The main distinction between a limited and general power of attorney is the type of authority that is conveyed to the agent by the principal. A general power of attorney bestows very broad authority to handle, for instance, all financial matters or all healthcare decisions. Usually, a general power of attorney is used so that, if the principal becomes incapacitated, the agent becomes authorized to handle all important decisions. That way there is no concern that the principal’s affairs will be left unattended.
A limited power of attorney, on the other hand, will provide more specific instructions for the agent, or include certain limitations in authority. A limited power of attorney is usually limited to carrying out only specific functions or transactions. Once the specified duties have been completed or the required goals accomplished, the powers are revoked and the document no longer has any effect.
Durable Power of Attorney
A power of attorney must be executed while the principal has the legal capacity to do so. With some powers of attorney, if the principal later becomes incompetent for any reason the power of attorney is revoked. There is a special type of power of attorney, a Durable Power of Attorney, which will remain valid despite the principal becoming incompetent. In Arkansas, a power of attorney created after the Uniform Power of Attorney Act is durable unless stated not to be. A durable power of attorney can also be drafted so that it does not become effective until the principal is deemed to be incapacitated.
Benefits of Having a Power of Attorney
There are several benefits of having an agent to act on your behalf. Executing a power of attorney allows you to clearly define how you want specific aspects of your life and affairs handled in the future. This gives you peace of mind in knowing that your chosen agent will have your directions or instructions to follow, instead of a court choosing someone for you and determining what it believes is in your best interest. An agent is also in a position to obtain any health benefits to which you may be entitled and to protect your assets as well as those benefits by submitting applications and making claims on your behalf.
Although there are many do-it-yourself power of attorney forms available, a legal instrument this important should be drafted specifically for you by an attorney who knows what is required. One size does not fit all when it comes to most estate planning instruments, so it is best to contact an estate planning attorney for assistance.