Choosing between a general vs. special power of attorney depends on the nature of the tasks you need someone else to handle on your behalf.
A general power of attorney typically authorizes someone to act broadly on your behalf, such as when you are absent or too busy to handle matters yourself. On the other hand, a special power of attorney is more specific, designed for particular tasks or situations where you require representation.
In the following text, we'll outline what each type of power of attorney—general and special power of attorney—entails and provide insights into their benefits and drawbacks.
What is a General Power of Attorney?
A general power of attorney is a legal document where an individual, known as the principal, grants authority to another person, called the agent or attorney-in-fact, to act on their behalf and handle various matters.
This document type is notable for its broad powers for the agent and covers regular issues that typically require only general authorization. The agent can manage banking transactions, handle real estate matters, deal with taxes, represent the principal in court, and sign contracts.
This document is commonly used when the principal cannot personally manage their affairs due to illness, absence, or a desire to entrust specific personal matters to someone with knowledge and expertise.
For all types of powers of attorney, including general ones, it is characteristic that the agent must act in the best interests of the principal. Therefore, the principal will always choose someone they trust who meets legal requirements (such as being 18 years of age and of sound mind) and possesses adequate knowledge to handle a particular task.
A general power of attorney becomes legally effective once signed by the parties involved, often in the presence of a notary public, depending on state law. It remains in effect until the principal dies, becomes incapacitated, or revokes the authority.
What is a Special Power of Attorney?
A special or limited power of attorney is a legal document that grants specific and limited authority to the agent to act on behalf of the principal in particular matters.
An example of this type is a special power of attorney for legal representation, where the principal authorizes an attorney to represent them in a particular case with specific powers or to negotiate a certain contract on their behalf.
Therefore, the content of a specific POA must be clearly defined to eliminate room for agent improvisation or broad interpretation, clearly outlining what actions the agent may and may not undertake.
In other aspects, the situation is similar to that of a general POA but with some specific nuances. The priority in selecting an agent lies in their specialized knowledge and abilities, which qualify them for carrying out particular tasks.
It is understood that the agent should also meet the general legal requirements and that the principal trusts them.
Additionally, both parties must sign the special POA in the presence of witnesses and a notary public, which is more rigorous compared to other types of POAs.
General vs. Special Power of Attorney
Here is the table that will help you decide whether you need a general or specific power of attorney for your specific situation:
Feature | General POA | Special POA |
Authority | Broad authority over all financial and legal matters | Specific authority limited to defined tasks or situations |
Scope | Covers a wide range of activities, such as financial, legal, and real estate | Handles specific tasks or transactions precisely defined, like legal representation in a specific case |
Flexibility | Allows flexibility in decision-making | Provides clear limitations on actions |
Purpose | Useful for ongoing management needs | Ideal for precise, one-time needs or representation |
General Power of Attorney Advantages & Disadvantages
A general power of attorney, like any legal document, has advantages and disadvantages.
Let's explore why you should use it and what precautions to consider.
GPA Advantages
Flexibility. A GPA offers significant flexibility due to the broad scope of authority the principal can grant to the agent. It allows the principal to authorize the agent for various tasks while also setting limits and restrictions when necessary. This way, the principals are assured that the agent's responsibilities align closely with their needs and preferences.
Convenience. A general power of attorney is convenient because it enables handling various tasks in any situation, regardless of whether the principal is absent due to travel, illness, or other reasons. With a GPA, management continuity is ensured, as the appointed agent can promptly manage routine transactions and respond to urgent matters without the principal's direct involvement.
Broad authority. This advantage implies that the broad authority given to the agent typically covers a wide spectrum of actions. These actions can range from handling financial transactions, such as managing bank accounts and investments, to dealing with legal matters and managing business affairs.
GPA Disadvantages
Potential abuse of authority. Because a GPA grants broad and unrestricted authority, there is a risk that the agent can misuse this power for personal gain or act against the principal's best interest. Therefore, it is essential to frame actions under GPAs within specific domains and procedures and to select a trusted and competent individual.
Lack of specificity. Unlike a special power of attorney, which restricts the agent's authority to specific tasks or transactions, a GPA encompasses a wide range of actions. This lack of specificity can lead to confusion or unintended outcomes, mainly if the agent interprets their authority differently from what the principal intended.
Risk of financial exploitation. GPAs grant access to resources and financial accounts, which can pose a risk of financial exploitation, particularly for elderly or vulnerable individuals. Agents with unrestricted authority might misuse funds or assets entrusted to them, causing financial harm to the principal.
Special Power of Attorney Advantages & Disadvantages
A special power of attorney provides more precise authority than a general power of attorney, but it also has its own advantages and disadvantages.
Let's explore those:
SPA Advantages
Specific authority. A SPA provides precise authority tailored to specific situations where the principal requires representation. For example, the principal can designate an agent to handle real estate transactions, legal document signing, or investment management tasks while excluding authority in other areas. This specificity ensures clarity and alignment between the agent's actions and the terms of the POA.
Reduced risk of abuse. Because a SPA limits the agent's authority to specific tasks or transactions, there is a reduced risk of abuse compared to a GPA. With a SPA, the principal can choose trustworthy individuals and define clear boundaries, which minimizes the possibility of misunderstanding and abuse of authority.
Legal clarity. The specific terms and limitations outlined in a specific power of attorney provide legal clarity for the agent and third parties involved in transactions or dealings authorized by the principal. This clarity can help prevent disputes regarding the agent's authority and responsibilities.
SPA Disadvantages
Limited scope. While specificity can be an advantage, it can also be a limitation. If the principal needs the agent to handle tasks or situations that were not stated when drafting the SPA, they will need to create a new special power of attorney form or consider a broader form of authority, such as a GPA.
Complexity in document drafting. Drafting a SPA requires careful consideration of the specific tasks or transactions the agent will handle. Principals must ensure all necessary details are included to facilitate the desired actions. It's important not to overly restrict the agent's authority because it could challenge their actions or hinder their effectiveness.
Additional costs and administrative burden. Using multiple special powers of attorneys for various tasks or transactions can be complex and administratively expensive. Each new SPA can incur additional legal fees and paperwork, increasing complexity and costs overall.
Legalities Involved in Executing General vs. Special POA
Each state has regulations and processes concerning both general and special POAs, which differ to some extent.
However, the standard rules for both types of powers of attorney are following:
Legal Capacity
The principal must possess the legal capacity to grant a POA, meaning they must be of sound mind and capable of understanding the nature and consequences of his or her actions. Additionally, granting a POA must be the principal's voluntary act, so any force or coercion on the principal is strictly forbidden and punishable, while the POA will not be effective.
On the other hand, the agent must be of legal age (usually 18) and have the mental capacity to understand the significance of the authority granted to them and act accordingly.
Documentation
Both the general POA and the special POA must be in writing, clearly outlining the scope of authority granted to the agent. As mentioned, a general POA includes broad powers over various matters, while a special POA is limited to specific tasks or transactions.
In both cases, authorities must be specified in the document. Otherwise, granting authority orally is extremely risky, prone to abuse, and, at the end, not valid.
Execution
The document must be executed according to the legal formalities prescribed by law, which may include signing the document in the presence of witnesses, notarization, or registration with the relevant authorities. These requirements ensure the authenticity of the POA and protect against fraud.
If these conditions are not met, the POA will not be legally valid, and the agent will not be able to take any action on the principal's behalf.
Revocation
The principal can revoke or terminate a general or special POA at any time, provided they are mentally competent. The revocation of this contract must be formal, requiring a notice of revocation to be issued to the agent and any relevant third parties.
This is very important so that third parties are aware of the revocation of the POA and can refuse any actions the agent might take after the revocation. The revocation of a POA must meet all the conditions required for issuing the POA, so the agent must be aware of this.
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Click HereFinal Thoughts
At some point in life or business, you may be unable to handle a task personally and need to delegate authority. This is where a power of attorney comes into play—a document that grants powers to the agent to act on your behalf.
If you are frequently absent due to business commitments or medical treatment and need someone to manage your ongoing financial, banking, or tax affairs, then a general power of attorney is the right choice. If you need an agent only for a specific, one-time task, then a special power of attorney is what you need.
In either case, choose someone you trust, clearly define their powers, and rest assured that your affairs will be handled properly.
General vs. Special Power of Attorney FAQ
The four types of power of attorney are: general POA, special POA, durable POA, and springing POA.
The duration of a special power of attorney is specified in the document and typically ends once the specified task or transaction is completed.
Yes, a power of attorney can be revoked at any time by the principal, as long as they are mentally competent to do so.
