A power of attorney (POA) is a document that authorizes one or more parties (known as the “agent” or “attorney-in-fact”) to act on behalf of a person (referred to as the “principal”). Most powers of attorney documents are guided by state law, which sets forth the POA form and the specific requirements regarding what defines a valid power of attorney.

What Is a Limited Power of Attorney?

A POA can be tailored to allow the agent to make only certain types of decisions. For example, a power of attorney can be used to allow another person to stand in your shoes and close a real estate transaction on your behalf. Powers of attorney that only allow an agent to do certain things are commonly referred to as a limited power of attorney.

A limited POA is usually limited to a timeframe, event, or specific purpose. As a result, it is only appropriate for some situations. For example, it is not the best option where you would like an agent to have a wide range of authority to handle your affairs with little restrictions.

When Does a Limited POA Make Sense?

Common examples of where it may be a good option are:

• You are physically unable to handle specific matters — for example, you are out of the country, traveling, or ill.
• You need assistance with certain transactions where the agent you choose is a professional with specialized knowledge.
• You temporarily need an agent to be able to act on your behalf.
• You need an agent to act for you only for a specific transaction.

A limited power of attorney is a legally binding document. It should be carefully drafted to make sure it encompasses the limitations you have in mind. For example, in some states, unless you specifically state otherwise, a power of attorney (even if limited to certain acts) can still be in effect if you become incapacitated.

Choosing an Agent

When choosing an agent to appoint, it is essential to find someone trustworthy, who ideally knows your wishes and will work in your best interest, but can maintain an objective perspective. A capable agent will also be responsible and fair, and have strong organizational skills. Note that, for a fee, you can hire a professional to take on this role.

Each state’s laws and rules regarding what constitutes a valid POA and what responsibilities are conferred on an agent are unique. In addition, a power of attorney form must generally be executed in a specific manner to be valid. Seek the assistance of your attorney to prepare a valid power of attorney appropriate to your particular needs.