A limited power of attorney is a legal document that appoints an individual to decide on your behalf regarding financial and personal matters under certain conditions. The person appointing the representative is called the principal, whereas the representative is called an attorney in fact or an agent.
The principal defines an LPOA’s scope, which may include specific financial or legal tasks, such as selling property and handling other necessary documentation on your behalf. Even though the agent has the authority to act for specified tasks, you retain the right to make your own decisions as long as you remain capable of doing so.
So, we are here to discuss the scope of a limited POA and how and why you should use it.
What is a Limited Power of Attorney?
A limited power of attorney is an official document that permits another individual to handle your finances and other personal matters, such as signing contracts, handling settlements, filing court documents, etc.
The meaning of limited power of attorney is self-explanatory, as the limited POA scope and effectiveness are determined by the principal.
The purpose of a limited power of attorney is for you to find someone and appoint them to take care of your finances or legal affairs if you want to pass such responsibilities to somebody else legally.
The same goes for situations in which you cannot perform tasks regarding financial matters or decide on legal affairs. An agent can sign a purchase agreement on your behalf in case of your absence, but only if you agree.
There are two general classifications of power of attorney, which also encompass limited POA: the ones with springing powers and the durable and non-durable ones.
Let’s clarify these distinctions:
Two General Classifications of Power of Attorney
Limited POA with springing powers. It becomes effective only after certain occurrences. For instance, it can be used in conjunction with the last will and testament for real estate planning purposes.
Durable limited POA. This POA remains effective even if the principal becomes incapacitated. In contrast, a non-durable limited POA is valid only while the principal is fully capable and terminates if the principal becomes incapacitated.
Limited Power of Attorney vs. General Power of Attorney
A limited POA scope is narrower than a general POA. An agent can perform your financial or legal tasks with the former. The latter involves a much larger set of decisions an agent can make on your behalf.
That’s why a limited power of attorney agent in charge of real estate can, for instance, sign a contract instead of you, while the general POA agent can do this and make transfers, gifts, and investments.
When to Make a Limited Power of Attorney
You can make a limited POA any time you are incapable of or prevented from completing a financial or legal task, which should be done formally and officially. Such scenarios include trips, vacations, or other absences or health conditions where you cannot be present or make decisions on this matter.
In other words, you may be on a trip and appoint someone to manage your business while you are away. Also, with a limited power of attorney for property documents, your assigned agent can sign the contract and buy or sell an asset for you.
If a principal is at a hospital and cannot make financial or legal decisions, a limited POA attorney in fact can jump in and do this on their behalf.
3 Key Benefits of Having a Limited Power of Attorney
The usefulness and benefits of a limited POA stem from the agent’s clearly outlined powers stipulated in such legal papers.
Let’s see what precisely a limited POA includes.
#1. Clear Agent’s Limits
Principals can create a limited POA and use the appropriate form to state clearly what the agent can do. For example, if you want to sell a property while away, you can appoint another individual to sign the contract instead of you.
Yet, you can also limit the scope of your document by stating that their only power is to sign the contract. This way, your agent cannot receive the payments instead of you, nor can they make any investments.
Another reason why a limited POA is beneficial is because its limitations also prevent potential abuses. For instance, an agent’s authority to sign a contract automatically prevents additional actions. Therefore, no financial abuse, which you would have to prove later on, can arise.
#2. Flexibility
You can choose between short- and long-term appointments when making a limited POA. This means you can have an agent for one specific task only once. Even if the task may imply a series of other smaller tasks, the effectiveness of your limited POA will end right after a particular task. This is good for two reasons.
First, your agent’s power ends immediately after task completion. So, if your agent didn’t live up to your expectations, you don’t have to do anything to revoke them, as their power automatically ends.
Lastly, you can see how well or poorly your agent has done and decide whether or not to put them in charge again for your future endeavors.
#3. Safety and Prevention
Just as with a power of attorney in general, a limited power of attorney brings safety and caution. Specifically, you can make limited POAs on time and then go on business trips or take other leaves, absences, or medical procedures.
By doing this, you can rest assured that your contracts will be signed and your transactions completed. Thinking long-term and preparing limited POA documents on time can also be beneficial for handling unexpected situations well.
How to Make a Limited Power of Attorney in 4 Easy Steps
To make a limited power of attorney, you must determine its purpose, decide upon your agent, and state the powers and time of effectiveness. In addition, it is helpful to use the right tools for document generation.
Let us now check each step separately.
#1. Determine the Aim of Your Limited POA
Determine why you need a limited POA—whether it is a financial or a legal matter. As these delegated tasks can vastly differ, start planning when, who, and why you should assign your responsibilities to someone based on the task type.
#2. Pick the Agent
Selecting the agent for your limited or any other type of POA is very important. The reason is simple—you don’t want unreliable people to interfere with your essential personal and financial affairs. You should know your agent and their trustworthiness and capabilities for handling specific tasks.
#3. Set Powers and Duration
Specifying the agent’s scope and the length of a limited POA is a must. Obviously, doing this prevents your agent from misusing their power in many respects. An excellent example is an agent signing a bill of sale but not getting the funds it stipulates.
#4. Use the Right Tools
You must use the proper forms to make your documents look clear. Let’s say you want to lease a car on a specific date but also plan to go on vacation during the same period. Therefore, a clear and thorough specification of powers and length in your document is crucial for efficiency.
We know that creating legal documents can also be tedious sometimes, so we recommend using our power of attorney builder to speed up the process. The generator contains all the necessary elements and is smoothly running.
Final Thoughts
A limited power of attorney helps you appoint a temporary financial and legal representative who can take action with limited powers and your consent only. Such a document clearly specifies the powers of an agent. It can be effective after a specific event or be durable or non-durable.
An LPOA is also flexible, as it is only effective when an agent performs a distinct task and not afterward. Finally, using high-functioning tools to generate such documents can help you save time and prepare error-free documents.
Limited Power of Attorney FAQ
A limited power of attorney is used to assign a representative to make financial and legal decisions on your behalf. The agent’s scope and the effectiveness of such a document are limited.
Yes. A limited power of attorney can be revoked at any time. The principal's capacity to make decisions and perform tasks is a primary prerequisite for revocations.
A limited power of attorney lasts until a task or decision is completed or terminates after the principal’s death. Its effectiveness can be triggered on a specific occasion and can be durable or non-durable.
