What is the difference between a Power of Attorney (“POA”), Attorney-in-Fact, General Durable Power of Attorney, Springing Power of Attorney and a Limited or Banking Power of Attorney?
The purpose of a Financial Power of Attorney (“POA”) is to give another person, referred to as your “Attorney-in-Fact,” “Power of Attorney” or financial “Agent,” the right to handle your financial affairs. The words “General” and “Durable” with regard to a Power of Attorney have legal meanings. The term “General” signifies that your agent has the right to do everything that you can do to manage your financial affairs and to access your assets. This distinguishes this Power of Attorney from a Limited or Banking Power of Attorney which is only created for a specific purpose, such as to allow an Agent to sign for you to purchase real estate or to access assets from one particular bank. The term “Durable” signifies that the Power of Attorney is effective immediately and can be used whether or not you are incapacitated (also referred to as “incompetent.”)
Generally, it is advisable to have a General Durable Power of Attorney, one that is effective immediately and allows your Agent to do anything on your behalf. By contrast, a “Springing Power of Attorney” has come into disfavor by professionals because of the difficulty of proving that a person is incapacitated, thus “springing” the Power of Attorney to life. Having a General Durable Power of Attorney together with an Advance Medical Directive can avoid the unnecessary cost and Court involvement of a Guardianship proceeding.
You should always be provided with at least two original copies of your Power of Attorney. Keep them in a safe place as only an original signed copy is legally enforceable. You may want to give one of the originals to your Agent immediately but, if not, your Agent should always know how to obtain it in the event it is needed. Sometimes clients are concerned about executing a General Durable Power of Attorney, however, this fear is generally unfounded. Remember, if you can place someone on a joint account with you (thereby giving that person access to your funds) or trust them when you can no longer adequately handle your own financial affairs, then you should be willing to designate that person as your Power of Attorney.
The Law Office of Richard M. Cohen will assist you to draft this important estate planning document to properly administer your financial affairs.