General, Limited, Springing, Durable – Which Financial Power of Attorney Do You Need?

by Cameron Huddleston


    You might have heard that it’s a good idea to have a power of attorney – someone you’ve named to make financial and legal transactions for you if you’re unable to yourself. You might also have heard that there’s more than one type of power of attorney. So you have to be careful about which type you choose because you could end up giving your POA too much or too little power.

    If you’re a financial caregiver for a parent or a loved one, you also want to make sure you’ve been given the right type of power of attorney. Otherwise, you might run into trouble when trying to help your parent with financial matters.

    To clear up any confusion, here’s what you need to know about the four main types of power of attorney. Working with an attorney to draft a POA document can help ensure that you make the right choice.

    Limited power of attorney

    A limited power of attorney limits the scope of power that your agent -- the person you name to act for you -- has. It can be limited to a specific transaction, types of transactions or a period of time. For example, if you’re going to be out of the country, you can draft a limited power of attorney to let someone sign for you at a real estate closing, says elder law attorney Josh Berkley.

    A limited power of attorney might seem ideal if you’re worried about giving someone too much power. However, if you (or your parent for whom you are a caregiver) were to develop, say, dementia and needed someone to manage money matters for you, you wouldn’t want to limit that person’s powers to specific transactions or a certain time frame. A limited power of attorney would be too limited.

    General power of attorney

    A general power of attorney gives your agent broad powers to make any sort of legal or financial transaction for you if you are unable to yourself. However, there are a few limits on a general power of attorney’s power. Typically, a general POA doesn’t have the authority to write a will for you or alter your will. And, unless designated as durable (see below), the power ends when you become incapacitated.

    For most people, the best option is to have a general durable power of attorney because it gives your agent broad powers that will remain in effect if you lose the ability to handle your own finances.

    An attorney can customize a general POA to limit powers even more – or add powers, Berkley says. For example, you might want to give your power of attorney the power to make gifts with your money, including to himself or herself. This power can come in handy if you end up needing long-term care and need to transfer assets to qualify for Medicaid to help pay for long-term care.

    Or you might want to explicitly prohibit your POA from gifting your money to himself if you’re worried about that person taking advantage of that power. However, if you can’t trust someone to handle your money responsibly, you shouldn’t name that person to be your power of attorney.

    Durable power of attorney

    A durable power of attorney remains in effect even if you become incapacitated temporarily or permanently. “I don’t know why anyone wouldn’t do durable power of attorney now,” Berkley says. “If you become incompetent, you want someone to be able to handle your affairs.”

    The designation can be used for a general or limited power of attorney. For most people, the best option is to have a general durable power of attorney because it gives your agent broad powers that will remain in effect if you lose the ability to handle your own finances.

    Springing power of attorney

    A springing power of attorney springs into effect only in certain circumstances that you designate. For example, a springing POA often is written to take effect once someone becomes incapacitated and two doctors agree that the person is no longer fit to handle his affairs.

    The added level of protection might seem great. However, it’s likely to create roadblocks for your power of attorney when he or she needs to start acting on your behalf, Berkley says. He tells clients that he won’t draft a springing power of attorney document unless they have a good reason for one because it can cause too many problems.

    [ Keep Reading: How to File a Tax Return for a Parent ]

    What to consider when naming a power of attorney

    As Berkley says, a general durable power of attorney typically is the best option. It does take effect immediately. So if you’re worried about giving someone that power while you’re still mentally competent, put the POA document in a home safe or safe deposit box and tell your power of attorney how to access it if something happens to you. “Until they have a copy of it, it’s no good,” Berkley says. A financial institution won’t trust that someone is your power of attorney unless that person has the document to prove it.

    However, if you can’t trust the person you’ve named to act responsibly, maybe you haven’t chosen the right person. You can name more than one person to be your power of attorney and require all of them to act together to create a system of checks and balances. However, Berkley cautions against that. “It’s a safeguard, but it can be a roadblock,” he says.

    Logistical issues can arise, such as getting agents in different states to come together to sign documents. Plus, it can lead to fighting among the agents. “Wait until something happens and a little money is involved,” Berkley says. “All those people who got along are ready to scratch each other’s eyes out.”

    If you name more than one agent, at least give them the power to act independently. Berkley says the better option would be to name just one person you trust wholeheartedly and name two alternates in case the primary power of attorney is unable to act or doesn’t want to do the job.

    If you feel like you’ve made a mistake with the person you’ve named or the type of power of attorney you’ve chosen, you can revoke the power and draft a new document. Just be sure to let your former POA and your financial institutions know that you’ve named a new power of attorney. 

    How to name a power of attorney

    There are plenty of do-it-yourself power of attorney documents that make naming an agent to act on your behalf fast and easy. However, you’re better off working with an estate planning or elder law attorney to ensure that you choose the right type of power of attorney and to have the document customized to your needs. You can read more about the pros and cons of DIY power of attorney documents here.

    To find an attorney, check your state bar association’s website (search for your state name and “bar association”) to see if it has an online member directory to find an estate planning or elder law attorney near you. You also could use the National Association of Estate Planners & Council’s online directory or the National Academy of Elder Law Attorneys’ online directory.

    [ Keep Reading: The Ultimate Guide to Power of Attorney ]

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    Cameron Huddleston

    Cameron Huddleston is the author of Mom and Dad, We Need to Talk: How to Have Essential Conversations With Your Parents About Their Finances. You can learn more about her at or follow her on Twitter @CHLebedinsky.

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