Limited Power of Attorney
A limited power of attorney is required to authorize a person to engage in specific types of transactions. These could range from handling personal finances to giving a contractor permission to make purchases for home construction or renovations.
Limited power of attorney is comprised of the Principal and Attorney-in-Fact. The person providing authorization is the Principal, while the attorney-in-fact is responsible for transactions outlined in the POA
The rights granted in limited power of attorney expire once the transaction is complete or on a specific date. For example, if a person is authorized to handle personal finances the POA expires on a date. If a person is selling a car or real estate, the POA expires when the sale is complete.
Some states require a Specific Power of Attorney form when titled property is involved. Depending on the type of property, additional forms such as Bill of Sale have to be attached to notarized POA forms. It's always a good idea to talk to a lawyer to make certain you have required forms.
While executing power of attorney forms isn't difficult, there are important decisions that need to be made. In most instances, only one attorney-in-fact is needed, but a person can include two or more if the situation warrants this.
If more than one attorney-in-fact is designated, you need to state how they are required to make decisions. This designation can be made as jointly; meaning they both have to be in agreement and make the decision together, or severally; meaning they can make decisions together or on their own.
It's also a good idea to designate a secondary attorney-in-fact. If problems arise that prohibit the primary agents from conducting the task, the secondary agent can take over responsibilities.
Power of attorney forms have to be witnessed by two people that are not related to you. When POAs are executed by law firms they are generally witnessed by staff members, as well as notarized. If you are writing your own POA, you will need to have the witnesses sign in front of a notary public.
Many states require limited power of attorney forms used for real estate transactions to be recorded. Additionally, once the transaction is complete a revocation of POA needs to be filed.
Real estate power of attorney forms are used for many reasons. They are often utilized by real estate investors that use the services of a property management group. Investors also establish real estate POA forms for realtors so they can buy and sell properties on their behalf.
Limited power of attorney does have certain restrictions. The attorney-in-fact is not allowed to conduct activities other than those listed. They cannot vote in public elections on behalf of the Principal, nor can they execute or revoke a last will and testament.
People appointed as attorney-in-fact are required to act as fiduciary for the Principal. They can be punished civilly and criminally if they violate the Principal's trust or engage in unethical practices.
Just because a person is granted power of attorney rights does not mean they have to accept them. However, if the attorney-in-fact assumes duties they are obligated to complete the task. This is where it is helpful to designate a secondary agent that can take over if problems arise.
Establishing limited power of attorney rights is also an essential element of estate planning. We invite you to learn more about protecting estate assets to avoid probate, along with different types of POA forms and their uses in our estate planning article library.