A power of attorney is a legal document that allows you to appoint another person to take control of your affairs should you become unable to do so. The person you appoint then becomes the agent, or attorney-in-fact, and the person who appoints that individual is known as the principal. A power of attorney can be created specifically to fit your needs and is a valuable tool to assist with any legal requirements.
There are different types of powers of attorney, which include:
- General (or Non-Durable) Power of Attorney. This is used only for a specific period of time and usually involves one certain transaction, in which you grant your agent authority to act on your behalf. Once the transaction is complete, the non-durable power of attorney ends.
- Durable Power of Attorney. This can be used to allow the agent to manage all of the principal’s affairs, if they become unable to do so. There is no set time period, it becomes effective upon the incapacitation of the principal and ends upon the death of the principal.
- Special or Limited Power of Attorney. This is used for a one-time financial or banking transaction, or for the sale of a particular property. This is generally used when the principal becomes unable to complete the transaction due to prior commitments or illness and wants to appoint an agent to act on their behalf. The only authority the agent has is what has been assigned to them in the limited power of attorney.
- Medical Power of Attorney. This grants the agent authority to take specific control over the healthcare decisions of the principal should they become incapacitated. This generally goes into effect upon consent from the presiding physician and lets the agent authorize all medical decisions related to the principal.
- Special Power of Attorney. This becomes effective in the future and only when a specific event transpires, such as the incapacitation of the principal or when something happens while the principal is out of the country and cannot act upon the event. The power of attorney can be durable or non-durable and can encompass any number of affairs the principal wishes to assign to the agent.
For real estate purposes, a general power of attorney authorizes the attorney-in-fact to engage in any legal business on behalf of the principal. Among the actions the agent can take regarding real estate is to buy and sell property; buy, manage or sell real estate, enter into contracts; and handle banking transactions.
A Special or Limited power of attorney allows your agent to make decisions in specific situations only – i.e., you are out of town or unavailable. Among the actions they would be able to take regarding real estate would be to sell, manage or mortgage it; make real estate planning decisions; make financial decisions; and handle banking transitions.
At a real estate closing, it’s important to have the principal read the form completely and consult an attorney if there are any questions. When signing a POA, the principal’s signature must be notarized at the time and place it is signed, and witnessed by two individuals.
The original POA must then be presented to the closing agent. It will be recorded in the land records along with the deed or the deed of trust. The POA should also be signed recently as most title insurance companies don’t want to insure an older POA. It is best to have it signed within the last year. It must also be durable, which means the power won’t end should the principal become incapacitated.