Power of Attorney Can be Broad or Narrow

Powers of Attorney can be very useful tools for estate planning purposes.  A power of attorney (POA) is a written authorization to authorize an agent to act on behalf of the individual establishing the legal document (called the principal).  Most commonly, a power of attorney grants power to the agent to carry out financial and business transactions such as accessing bank accounts, selling properties or paying bills.

Broad Powers of Attorney

A power of attorney can be broad or narrow.  Most people or financial planner would draft broad general powers of attorney to cover all types of transactions.   A broad power of attorney is appropriate when the principal has decided to grant substantial powers to another person that he or she trusts completely, such as a spouse or child.  

A broad (also called general) power of attorney allows the agent to basically do anything that the principal is allowed to do.  Such broad powers would facilitate business transactions when the principal becomes disabled unexpectedly. However, a person should be carefully when preparing a general power of attorney.  A short power of attorney that grants broad powers to an agent may not be accepted by financial institutions or government agencies for fear of fraud.  Hence, a carefully drafted power of attorney may be necessary based on the principal's particular needs and circumstances. 

Narrow/Specific Powers of Attorney

There is no legal requirement that a power of attorney must be broad or comprehensive.  A power of attorney can be narrowly written to make specific business transactions possible.  In fact, this practice is quite common in various types of business transactions.  For instance, an individual may live in one country but own a house in another country.  If one day she decides to sell this house, it would be more convenient to grant a power of attorney to an agent in the country to facilitate the sale.   She may choose a family member, a friend or a professional (real estate agent, lawyer, etc.) to act as her agent.

Duration of Powers of Attorney

Generally speaking, a power of attorney is effective upon execution (signing).  But it can also be written in such a way that it is only effective when something happens.  For example, a person may decide to make a power of attorney effective only when he or she becomes unable to handle business affairs due to mental or physical disability.  This is called a "springing" power of attorney.

A power of attorney is considered "durable" after execution.  It means that the power will continue to exist indefinitely unless it is changed or explicitly revoked by the principal.  Hence, if a person does not intend to have a durable power of attorney, it is important to clearly specify the period of validity or how a power of attorney can be terminated in the document.  

Other Estate Planning Tools

Sometimes people confuse a power of attorney with other documents such as Health Care Power of Attorney and Last Will and Testament.  A Health Care Power of Attorney is used to provide instructions to health care providers regarding when and what life-sustaining procedures should be used, appoint an agent to make health care decisions, and also to grant such agent authority to have access to the principal's medical records.  A Last Will and Testament is a legal documents that allows an orderly disposition of one's properties according to his or her wishes. A Will also allows the naming of executors to administer the estate, trusts to manage any trusts formed, and guardians for any minor children.   Without a valid Will, properties will be distributed based on state's default rules and the court will appoint a legal guardian for minor children.