Powers of Attorney, Demystified

If you give someone a “power of attorney”, what exactly does that mean?  The answer will depend on many factors, most importantly the words of the document that created the power of attorney.

A “power of attorney” is a document that is signed by a a person (the “grantor”) that grants legal authority to another person(s) or banking institute (the “attorney-in-fact”) to act on behalf of the grantor.  There are several different types of power of attorney.  The most common type is a “general durable power of attorney.”  This document give the attorney-in-fact the ability to act on behalf of the grantor in any situation, without limitations as to time or type of act, and regardless of the grantor’s subsequent disability or incapacity.  The most common use of a general durable power of attorney is between spouses, so that one spouse gives the legal authority to another spouse to act on his or her behalf.

The next type of power of attorney is a “springing power of attorney.”  This type of power of attorney grants the attorney-in-fact the authority to act on behalf of the grantor only if and when the grantor becomes disabled or incapacitated.  The power “springs” into action upon the disability, giving it the name.   In practice,  I recommend this type of power of attorney for an individual who is in good health, and is giving the power to anyone not a spouse.  By limiting the circumstances in which the attorney-in-fact has power to act on behalf of the grantor, the grantor is safeguarding herself from possible abuse of the power.

The last type of power of attorney is a “limited power of attorney.”  This power of attorney is typically used for specific transactions or situations, most commonly in real estate transactions.  In these situations, the grantor gives another person the power to act on the grantor’s behalf for a very specific purpose, i.e.  to sign the grantor’s name on documents necessary to sell or purchase a home.  After the documents are signed, the power of attorney is invalid and the attorney-in-fact cannot take any actions on behalf of the grantor.

Both a general durable power of attorney and a springing power of attorney must specify the powerts granted to the attorney-in-fact.  The powers can be as broad or as narrow as the grantor wishes; but they must be specified in the document.  If the grantor wants the attorney-in-fact to have banking powers, sell or manage real estate, prepare or sign tax returns, collect rents, etc., the power of attorney must specifically grant those powers.

Under the Revised Durable Power of Attorney Act, N.J.S.A. 46:2B-8.1 et seq., a power of attorney must be notarized in order to be valid in New Jersey.

On a final note, a medical power of attorney, sometimes called a medical directive or living will, is a different document dealing only with health care decisions.   A “regular” power of attorney does not typically grant the attorney-in-fact the power to make medical or health care decisions for the grantor.   This must be done is a separate document.