Are you under the impression that one type of power of attorney is the same as the next? Did somebody tell you there is only one type of power of attorney? If you are confused regarding this portion of your estate plan, it is time to learn more. It is time to get a solid grasp on the many types of power of attorney.
General Power of Attorney
In short, this gives another party, known as an agent, the ability to handle your personal and financial affairs if you are unable to do so yourself. For example, if you are out of the country for an extended period of time, this person can step in to make key decisions until you return.
Some of the “powers” typically granted by a general power of attorney include:
- File tax returns
- Enter into contracts
- Settle claims
- Buy or sell real estate or other property
- Purchase life insurance
Limited Power of Attorney
With a limited power of attorney, you can authorize your agent to act on your behalf in relation to particular situations.
A limited power of attorney is defined by Nolo as follows:
“A power of attorney that gives the agent power to handle only a specified matter — for example, to sign papers completing a single business transaction or property transfer.”
Health Care Power of Attorney
This type of power of attorney is a common part of an estate plan, as it gives an agent the ability to make health care decisions if you are incapacitated. Just because you have a health care power of attorney doesn’t mean you lose the ability to make decisions when you are able to do so. It only goes into effect if you are incapacitated.
Note: a health care power of attorney and living will are not the same thing. A living will is created to direct medical professionals on the type of medication and treatment you want to receive. It does not give another party the ability to make decisions on your behalf.
These are three of the most common types of power of attorney, but you may want to discuss others, such as a durable power of attorney, with your legal team.