Generally, there are four types of powers of attorney, or POA.
A power of attorney is a legal document that allows you to appoint someone you know and trust to make decisions on your behalf when you cannot make them yourself. A recent article in The Star-Ledger, titled “Your Money: The truth about ‘power of attorney’ documents,” provides helpful information about the essential subject of powers of attorney and their uses.
A “Special Power of Attorney” grants an individual the authority to perform a specific act or acts. Just like the name implies, this authority is limited to the special powers listed.
A “Durable Power of Attorney” expressly provides that it is not terminated by the grantor’s incapacity. In contrast, a “Non-Durable Powers of Attorney” is terminated if the principal becomes incapacitated. The document can be as broad or as specific as the grantor wants, but generally it gives a person expansive powers and is used when the grantor becomes incapable of managing his or her affairs.
Similarly, a “Springing Power of Attorney” can also be very particular or expansive, but it only “springs” into effect if the principal becomes incapacitated. Caution: this type of document can create issues, as financial institutions will not recognize this POA until they receive official notification of the incapacity of the grantor.
Last, some states have a “Statutory Power of Attorney” in which case the POA need only be presented to the financial institution. The institution must honor a validly executed POA unless it believes in good faith that it does not look genuine, that the principal is deceased, that the document has been revoked, or that the principal was under a disability when he or she signed it.
Some financial institutions may not be helpful. In fact, some will insist that their particular form needs to be completed. Also, if incapacity has already occurred and an institution is unwilling to honor the POA, The Star-Ledger suggests that you bring in your estate planning attorney to help resolve the issue. Finally, the article reminds us that a POA commonly only covers financial matters, and that a separate health care POA is needed for health issues.