A limited power of attorney is a legal document that gives someone (the agent) the authority to temporarily act on your behalf (the principal) in a specific situation of legal, personal, or financial nature.
It is essential for the principal to carefully consider the specific tasks or decisions they wish to delegate and to clearly define the scope and duration of their authority within the document.
The agent can only act in a restricted capacity and for a defined period you indicate in the form. After the action has been enacted or you go past the end date, the power of attorney becomes void and has no legal effect.
The document must adhere to the same signing requirements as those for a durable power of attorney in the principal’s corresponding state.
Limited vs Durable Power of Attorney
Both documents authorize someone you choose to handle your affairs, but the main difference is the scope of their powers:
- A Limited Power of Attorney (LPOA) grants authority to perform only the specific task or set of tasks on your behalf without giving them unlimited access to your affairs.
- A Durable Power of Attorney gives broad powers over your affairs to act on your behalf and perform almost any legal action you could do yourself (except what you specifically restrict them from doing in your instructions on the form).
For instance, an LPOA can allow someone to cash checks for you and open your safety deposit box, but that agent wouldn’t be authorized to withdraw money or access your finances in any other way.
A limited power of attorney gives your agent specific authority so they can complete certain tasks for you (such as signing a contract) but doesn’t grant the agent complete authority over your affairs.
Here are some examples of circumstances in which the document may be helpful:
- Real estate transactions: If you are buying or selling real estate but cannot be present for the closing or signing of documents, you can grant your agent authority to sign them on your behalf or even to help negotiate and make offers to buy or sell a property on your behalf.
- Family matters: If you need someone to temporarily act as a guardian for your children while you are unavailable, you can specify these arrangements in the document.
- Financial management: If you’re temporarily unavailable due to travel or illness, you can authorize someone to manage your bank accounts, pay bills, or handle investment decisions during your absence.
- Tax matters: Your agent can interact with the Internal Revenue Service (IRS) or other tax agencies on your behalf and handle other activities, like preparing and filing taxes.
- Investment decisions: You can grant the power to buy or sell specific stocks, bonds, or other assets on your behalf.
- Business affairs: If you run a company and need someone to act on your behalf for specific business matters, you can grant an agent the power to sign contracts, make decisions, or represent you in negotiations.
- Vehicle-related matters: You can use a limited motor vehicle power of attorney to authorize someone to handle related transactions and duties on your behalf.
- Traveler’s concerns: If you are away on an extended vacation or working abroad, you can appoint a trusted person to handle your essential financial matters during this time.
- Military personnel affairs: Those deployed overseas can appoint someone to manage their affairs while away from home.
- Legal proceedings: Appointing an attorney in fact to represent you in legal matters, such as lawsuits or court hearings, and handle legal decisions can be especially useful if you are unavailable or unable to attend legal proceedings in person.
- Retirement and pension matters: You can designate a person to manage your pension or retirement accounts. They can make withdrawals, rollovers, or other decisions as outlined in the form.
You may also create limited power of attorney documents for any minor tasks requiring someone to oversee your property responsibly, such as driving your car cross-country or building on your land.
Considerations of a Limited Power of Attorney
Using a limited power of attorney requires careful thought due to its unique nature and implications. Below are some key considerations:
Document: It gives someone the power to sign for a specific transaction. It is essential to pay careful attention when drafting it, ensuring it is clear, precise, and legally sound. The agent should not be authorized to sign any documents that are not listed.
Scope: Determining the extent of authority is a critical consideration. The scope should align with the specific purpose for which the form is created and safeguard the principal’s interests.
Duration: There is a start and end date for the form’s validity. This could be for a single transaction, a specific period (e.g., a week, a month), or until a particular event occurs. The form is only in effect for the period defined.
How Long Is a Limited POA Good for?
You can set up your limited power of attorney to end at a specific date, after a particular event, or when its specific purpose (if it’s created for a single task like selling a home) is completed. In most states, if you don’t include an end date/event, the form will last until:
- The principal becomes incapacitated (if the POA is not durable).
- The principal revokes the power of attorney.
- The death of the principal or other party.
- The agent is unable or unwilling to perform their duties (and there’s no successor).
Revoking a Limited Power of Attorney
The principal keeps the right to revoke or amend the document at any time as long as they are of sound mind. To do this, a revocation of power of attorney form must be created and delivered to the agent and any third parties involved.
The principal can specify an end date, which serves as an automatic cancellation trigger. This means that upon the selected date, it will no longer be valid, and the agent will lose its powers.
Another method for automatic revocation is when the action or responsibility, as outlined in the limited power of attorney form, has been fulfilled. In such cases, it will cease to be valid. For example, if they were tasked with overseeing a real estate transaction, once that transaction is completed, the document is no longer in effect.
How to Write a Limited Power of Attorney
Once the principal decides what specific powers to grant, they can begin completing the form. Here are the steps to follow:
Step 1 – Agent (Attorney in Fact) Designation
While considering the appointment of an agent, also known as an attorney in fact, the principal should carefully select someone they know and trust from any of the following:
- a family member
- a close friend
- a lawyer
- any trusted party that can act with their best interests at heart
Once the agent or agents are chosen, the form should include their full name and address, together with that of the principal.
Additional persons can also be nominated to be the principal’s successor agent(s) if the initial agent(s) become unable or unwilling to serve.
Step 2 – Powers
Here, the principal should leave detailed instructions for what the agent may do on their behalf. They will be limited to precisely what is written here and cannot do anything that is not listed, so all powers granted must be specified carefully.
Limitation on Agent’s Authority: This clause is included in the form and prevents agents from using the principal’s property unless allowed to do so.
Step 3 – Special Instructions (Optional)
Any special instructions from those given in the previous section should be listed here.
Step 4 – Effective Date
Unless otherwise stated in the Special Instructions section, the principal should select one checkbox to explain when the powers will take effect. This can be:
- upon a specific event
- on a certain date
- upon the principal’s disability or incapacity
Step 5 -Termination
The power of attorney expires when a specific task is completed or upon the expiration date specified in the document. A non-durable power of attorney is automatically canceled if the principal becomes incapacitated.
Step 6 – Power of Attorney Signatures
The principal must sign the form. Depending on each state law, one or two witnesses’ signatures and/or a notary acknowledgment may be required. The notary public verifies the identity and intent of the parties involved, ensuring the document’s legality, while the witness is typically present to observe the principal’s signature.
How to Establish a Limited Power of Attorney
Here is a step-by-step guide to help you set it up:
Step 1 – Determine the Purpose
The principal must identify the reason for creating the power of attorney. Whether it’s for real estate transactions, financial management, or legal matters, understanding the exact scope of authority to delegate is a vital first step.
Step 2 – Draft the Legal Document
Once a trustworthy and responsible individual to act as the attorney-in-fact has been selected, the principal can create the initial form to assign specific powers.
Step 3 – Revise
The principal should carefully review it to ensure it accurately reflects their intentions. If any changes are necessary, working on revisions is recommended until they are satisfied with the content.
Step 4 – Distribute Copies
After the limited power of attorney is signed and notarized (if applicable), the attorney in fact should obtain a copy, and the principal should keep one for their records.
If the form involves financial institutions or legal matters, copies to relevant third parties might be required, such as banks or lawyers.
Step 5 – Inform Key Parties
The principal must inform relevant parties about the existence of the form, especially those with whom the attorney in fact may interact.
Step 6 – Review and Update
The form should be periodically reviewed to ensure it remains up-to-date and aligned with the principal’s wishes.
Limited Power of Attorney Sample
Download our limited power of attorney template below in PDF or Word format.
Frequently Asked Questions
Does a limited power of attorney need to be notarized?
A limited power of attorney may or may not need to be notarized, depending on where you live. Jurisdiction plays a critical role, as different states may have varying requirements that must be followed to ensure the documents are legally sound.
Almost all states will mandate that someone (whether a witness, notary public, or both) verify the identity of the person signing, but you should research your state’s laws and requirements before signing the document.
The Uniform Power of Attorney Act, which 29 states have enacted as of 2022, requires powers of attorney to be signed by the principal and acknowledged in the presence of a notary public to be legally binding.