Given the unpredictable nature of life, you never know when a power of attorney might be needed. Some powers of attorney are typically executed in advance, but others like the Limited Power of Attorney, more often, are executed when the situation calls for it.
In recent years, the Limited Power of Attorney or LPOA has become a common practice in situations involving money management, but there are other uses as well.
A Limited Power of Attorney is used to grant authorization to an agent to act on your behalf.
As opposed to a General Power of Attorney, affording an agent full authority to act on your behalf, you can use a Limited Power of Attorney to give your agent a more limited scope of authority.
On the form, you can select which power to grant to the agent. Most often, this is limited to the ability to cash checks and other rudimentary banking transactions.
You can set a Limited Power of Attorney to expire after a task is completed or within a short period. You can also create several LPOAs for distribution to equally as many agents.
Depending on your state, a Limited Power of Attorney may also be known as:
Special Power of Attorney
Proxy
Anyone who needs another person to perform an act they can't conduct themselves would use a power of attorney to do so. As such, a Limited Power of Attorney can have many benefits and be quite useful.
If you're on an overseas trip or otherwise indisposed, you can authorize someone to close a property sale or do something else for you. However, you can also set the POA to expire in a specific amount of time. Similarly, you can authorize an agent to act as your portfolio manager and make investment decisions on your behalf.
In most cases, a Limited Power of Attorney is assigned to a business associate, attorney, or spouse granting them the power to sign a legal document on your behalf.
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To create your document, please provide:
Your Personal Information: Your name, address, social security number, and EIN if this is for a business
Agent's Personal Information: Name, address, and other pertinent information
Expiration Date: List the date when the authorization ends
Explanation of powers: Detailed description about what the agent is authorized to perform on your behalf
State: Which state's laws should govern the document
Agent: An individual at the receiving end of the Limited Power of Attorney, also known in common law as your attorney in fact.
Principal: The person who is granting the power of attorney to an agent.
Fiduciary: Someone who has to act in the best interests of another person or entity.
Portfolio Manager: A person who manages an investment portfolio.
Durable Power of Attorney: A POA that continues after incapacity but ends at death.
Non-durable Power of Attorney: A POA that expires upon the principal's incapacity or death.
Medical Power of Attorney: Also known as an Advance Directive, it gives the agent the power to make medical decisions for the principal.
Springing Power of Attorney: Also known as a Conditional Power of Attorney, this becomes valid only when certain events come to fruition, like if a serviceperson is called to active duty.
In most states, a Limited Power of Attorney only has to be signed by the principal creator instead of the agent(s). In some cases, an oral agreement may be enough. A Limited Power of Attorney should be signed in front of a witness or a notary public and then notarized.
After a Limited Power of Attorney is signed and notarized, you have to send a notarized copy to all agents. It doesn't have to be filed with a court or the registrar, though some states may require specific POAs to be filed with a court.
The essential difference between the two is that the former ends when the principal becomes incapacitated. Whereas a Durable Power of Attorney is so called because it continues at the principal’s incapacity. Both will expire upon death. However, even a Durable Power of Attorney can be revoked, such is the case if divorced spouses neglected to update the paperwork.
You can revoke any type of power of attorney in three ways. You can issue a power of attorney revocation available on 360 Legal Form and have it sent to the agent. Another option is to assign another agent to replace the current. Finally, in the event of the principal’s death the Power of Attorney is automatically revoked. For non-durable powers of attorney, the Power of Attorney is also automatically revoked upon the principal's incapacity.
An agent to your POA does not have the power to change your will or trust documents. Furthermore, an agent does not have the right to transfer their power to another person. The primary reason is that the appointed agent has a fiduciary duty towards the principal to act in their best interests. If there's a suspicion of fiduciary betrayal, a power of attorney can be challenged in court.
Many people pick their attorneys, relatives, friends, or spouses to give a POA to. Needless to say, you should only give it to trusted people who don’t have a conflict of interest.
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