Estate Planning 101: Understanding Powers of Attorney

A power of attorney, sometimes referred to as a “POA,” is a written document that provides someone else with certain rights that you would normally hold. The principal, the person granting the power, authorizes another person, the attorney-in-fact, to act on their behalf. The relationship between the two is based on theories of agency, which means that one person serves as the agent of the other.

In New Jersey, there are four types of powers of attorney. However, you can design a power of attorney to meet your specific needs—from granting extensive powers to providing just one or two rights to another person.

General Power of Attorney

A general power of attorney is the most wide-reaching grant of power available. The person that you designate can act in a variety of situations, including dealing with your financial matters. This POA is infrequently used as it is extremely broad, and many people do not want to give this much power to someone else.

This type of POA will be active as soon as the document is drafted and will stay in effect until the principal becomes incapacitated or passes away.

Durable Power of Attorney

Like a general POA, a durable POA will go into effect immediately. It is commonly used to make decisions regarding health care, but it can extend to other situations as well. The main difference between a general POA and a durable POA is that the durable POA will remain valid even after the principal becomes incapacitated or unable to handle their own affairs. It is often used in situations where an elderly individual develops dementia or another debilitating health problem.

Limited Power of Attorney

A limited POA allows the principal to give away only certain rights to the attorney-in-fact. It will set out specific situations where the other individual will have powers of the principal. It can be as limited as you would like. In some cases, the principal may only grant another person powers as it pertains to particular real estate or other property. It can also be set up to only apply for a certain amount of time as well.

Springing Power of Attorney

This POA “springs” into action when the principal becomes incapacitated or debilitated. It will not apply immediately when written, unlike other types of POAs. You may need to have a doctor’s opinion to determine when someone is incapacitated. However, establishing incapacitation or debilitation can sometimes be difficult, which makes this POA tricky in some circumstances.

Finding a POA that Is Right for You

An experienced estate planning attorney can help you determine which type of POA you need.  The Matus Law Group can also help you develop this written document to meet your needs or the needs of a loved one as well. Call 732-281-0060 for more information.

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