A Power of Attorney (POA) is a legal document that allows an individual (the principal) to grant another person (the agent or attorney-in-fact) the authority to act on their behalf. This authority can cover financial, legal, medical, or business matters.
There are different types of Power of Attorney, but two of the most commonly used are the Durable Power of Attorney and the General Power of Attorney. While both serve similar functions, they have distinct differences that affect how and when they can be used.
This guide explains the differences between a Durable Power of Attorney vs. General Power of Attorney, their uses, benefits, and limitations.
What Is a General Power of Attorney?
A General Power of Attorney (GPOA) gives an agent broad powers to handle financial and legal matters on behalf of the principal. It is typically used in situations where the principal needs someone to manage their affairs temporarily or in their absence.
Key Features of a General Power of Attorney
- Broad authority: The agent can make decisions about finances, property, business operations, and legal matters.
- Valid only while the principal is competent: If the principal becomes mentally incapacitated, the General POA becomes invalid.
- Used for temporary situations: Often used when the principal is traveling, unavailable, or unable to handle their affairs personally.
Common Uses of a General Power of Attorney
A General POA is useful in situations such as:
- Managing financial transactions, including banking, investments, and bill payments.
- Handling real estate transactions, such as buying or selling property.
- Representing the principal in legal matters or contracts.
- Overseeing business operations in the principal’s absence.
Limitations of a General Power of Attorney
- It ends if the principal becomes incapacitated due to illness, accident, or other medical conditions.
- It automatically expires upon the principal’s death.
- It may not be suitable for long-term planning since it is not valid in cases of mental decline.
What Is a Durable Power of Attorney?
A Durable Power of Attorney (DPOA) provides the same powers as a General POA but remains valid even if the principal becomes mentally incapacitated. This type of POA is often used for long-term financial and healthcare planning.
Key Features of a Durable Power of Attorney
- Remains effective even if the principal becomes incapacitated.
- Can be broad or limited: The principal can specify which powers the agent has.
- Often used in estate planning to ensure financial and medical decisions can be made if the principal is unable to do so.
Common Uses of a Durable Power of Attorney
A DPOA is often used for:
- Managing finances and investments if the principal develops dementia, Alzheimer’s, or other medical conditions.
- Handling legal matters without requiring court intervention.
- Making healthcare decisions if included in a Medical Power of Attorney.
- Long-term care planning to ensure continuity of financial management.
Limitations of a Durable Power of Attorney
- While it remains in effect if the principal is incapacitated, it expires upon their death.
- It can be misused if granted to an untrustworthy agent.
- The principal must be mentally competent at the time of signing the document.
Key Differences Between a Durable and General Power of Attorney
| Feature | General Power of Attorney | Durable Power of Attorney |
|---|---|---|
| Effectiveness | Valid only while the principal is mentally competent. | Remains valid even if the principal becomes incapacitated. |
| Purpose | Used for temporary or broad financial and legal management. | Used for long-term financial, legal, or healthcare planning. |
| Termination | Ends if the principal becomes incapacitated or dies. | Ends only upon the principal’s death. |
| Common Uses | Business transactions, real estate deals, banking, tax filing. | Managing finances, estate planning, medical decision-making. |
| Long-Term Viability | Not suitable for situations where the principal may become incapacitated. | Ideal for individuals planning for potential future incapacity. |
Choosing Between a Durable and General Power of Attorney
The choice between a General POA and Durable POA depends on the principal’s needs and future considerations.
When to Use a General Power of Attorney
- If you need someone to manage your financial affairs temporarily, such as during travel or illness.
- When handling specific legal transactions, such as selling property.
- If you want to give an agent broad authority, but only while you are mentally competent.
When to Use a Durable Power of Attorney
- If you want to ensure financial and healthcare decisions can still be made if you become incapacitated.
- For long-term estate planning to avoid court intervention in case of illness.
- If you have a progressive medical condition, such as dementia or Alzheimer’s.
How to Create a Power of Attorney
If you decide to create a Power of Attorney, follow these steps:
1. Choose a Trustworthy Agent
The agent you select will have significant control over your affairs, so choose someone responsible and trustworthy.
2. Decide Between General or Durable POA
Consider your long-term needs and whether you want the POA to remain in effect if you become incapacitated.
3. Specify the Powers Granted
Clearly outline what the agent can and cannot do. Some common powers include:
- Managing bank accounts and investments
- Selling or purchasing property
- Making medical decisions (for a Medical POA)
- Handling business operations
4. Draft the POA Document
- Use a state-specific POA form or consult an attorney.
- Ensure the document includes clear terms on when it becomes effective and when it ends.
5. Sign and Notarize the Document
Most states require the POA to be signed before a notary public for legal validity. Some states may also require witnesses.
6. Store the Document Safely
Keep the original POA in a secure but accessible location and provide a copy to your agent and trusted family members.
Revoking a Power of Attorney
A Power of Attorney can be revoked at any time as long as the principal is mentally competent. To do this:
- Create a written revocation document stating that the POA is no longer valid.
- Notify the agent and any relevant institutions (banks, lawyers, etc.).
- Destroy old copies of the POA to avoid confusion.
A Power of Attorney is a crucial legal tool for managing financial, legal, and healthcare matters. The main difference between a General Power of Attorney vs. Durable Power of Attorney is that a General POA expires if the principal becomes incapacitated, while a Durable POA remains in effect even under such circumstances.
If you need temporary financial management, a General POA may be suitable. However, if you want to ensure long-term financial and healthcare decisions are covered, a Durable POA is the better option.
By carefully selecting the right Power of Attorney, you can protect your interests and ensure your affairs are managed smoothly, even in unforeseen circumstances.