When creating a power of attorney, one of the fundamental decisions you face is how much authority to grant your agent. Should they have broad, comprehensive powers over all your financial affairs, or should their authority be limited to specific tasks or time periods? The distinction between a general and limited power of attorney determines the answer, and choosing the right scope is essential to both protecting your interests and enabling your agent to act effectively.
What Is a General Power of Attorney?
A general power of attorney grants your agent broad authority to act on your behalf across a wide range of financial and legal matters. With a general POA, your agent can typically perform almost any financial or legal act that you could do yourself.
Common powers included in a general POA encompass managing bank accounts and financial assets, paying bills and managing debts, buying, selling, and managing real estate, handling investments and securities, filing tax returns, managing insurance policies, operating a business, entering into contracts, and accessing safe deposit boxes.
The word "general" refers to the scope of authority, not to the durability of the document. A general POA can be either durable (surviving the principal's incapacity) or non-durable (terminating upon incapacity). Most people who create a general POA for long-term planning choose the durable version.
A general POA is appropriate when you want comprehensive protection and trust your agent to handle all aspects of your financial life. It is the most common type of POA used in estate planning because it provides the flexibility needed to address whatever situations may arise.
What Is a Limited Power of Attorney?
A limited power of attorney (also called a special power of attorney) restricts your agent's authority to specific tasks, transactions, or time periods. The agent can only act within the narrow scope defined by the document and has no authority beyond those defined boundaries.
Examples of limited POAs include authorizing an agent to sell a specific piece of real estate, granting authority to manage a particular bank account, allowing someone to sign closing documents for a home purchase on a specific date, authorizing an agent to handle a specific business transaction, granting authority to manage your affairs while you are on a particular trip, and allowing someone to pick up important documents on your behalf.
A limited POA ends when the specified task is completed, the designated time period expires, or the principal revokes it. Because it is designed for specific situations, a limited POA provides maximum control over what the agent can and cannot do.
Key Differences Between General and Limited POAs
Scope of Authority
The most obvious difference is the breadth of authority granted. A general POA is like handing your agent a set of master keys. A limited POA is like giving them a key to one specific door.
With a general POA, your agent has the flexibility to handle virtually any financial matter that comes up, even situations you did not anticipate. With a limited POA, your agent can only handle the specific matters identified in the document. If a situation arises outside that scope, the limited POA does not help.
Duration
A general POA typically remains in effect indefinitely (or until the principal becomes incapacitated, if non-durable, or until death). A limited POA is usually tied to a specific transaction or time period and expires when that transaction is completed or that period ends.
However, these are tendencies rather than rules. You can create a general POA with an expiration date, or a limited POA without one. The key distinction remains the scope of authority, not the duration.
Risk Level
A general POA carries more inherent risk because the agent has broader authority that could potentially be misused. A limited POA reduces risk by constraining what the agent can do. If a limited POA agent misuses their authority, the potential damage is contained within the narrow scope of powers granted.
That said, the risk of any POA depends primarily on the trustworthiness of the agent, not just the scope of powers. A trustworthy agent with a general POA poses less risk than an untrustworthy agent with a limited one.
Flexibility
A general POA offers maximum flexibility, allowing your agent to respond to whatever situations arise. A limited POA trades flexibility for control, ensuring the agent acts only within carefully defined parameters.
When to Use a General POA
A general POA is typically the right choice when you are creating a comprehensive estate plan and want your agent to be able to handle any financial matter that may come up, when you want to prepare for potential long-term incapacity and need your agent to manage all aspects of your finances, when you trust your agent completely and do not want to restrict their ability to act in your best interest, or when the range of potential situations is too broad to define in advance.
When to Use a Limited POA
A limited POA is the better option when you need someone to handle a specific transaction and do not want them to have authority beyond that, when you want to grant temporary authority for a defined period (such as while you are traveling), when you are not comfortable granting broad authority to your agent, when you are using a professional or acquaintance rather than a close family member as your agent, or when a specific institution requires a POA for a particular transaction.
Can You Have Both?
Absolutely. Many people maintain both a general durable POA as part of their long-term estate plan and create limited POAs as needed for specific transactions. The two are not mutually exclusive.
For example, you might have a general durable POA naming your spouse as your agent for long-term incapacity planning, while also creating a limited POA for a trusted friend to handle the sale of a vacation property.
If you have both a general and limited POA, make sure the two documents do not contradict each other. The limited POA should be consistent with, and ideally reference, the general POA to avoid confusion.
Customizing Your General POA
Even within a general POA, you have the ability to customize the powers granted. You can exclude specific powers that you do not want your agent to have. For instance, you might grant broad financial authority but exclude the power to make gifts, sell your primary residence, or change beneficiary designations.
You can also include conditions or requirements for certain actions. For example, you might require your agent to obtain a professional appraisal before selling any real property, or require approval from a second agent for transactions exceeding a certain dollar amount.
This hybrid approach gives you the broad coverage of a general POA with the targeted restrictions of a limited one.
Safeguards for Both Types
Regardless of whether you choose a general or limited POA, consider these safeguards.
Choose your agent carefully. This is the single most important decision, whether the POA is general or limited.
Include an accounting requirement. Require your agent to keep records and provide periodic accountings to a designated person.
Name successor agents. Ensure there is a backup if your primary agent cannot serve.
Review regularly. Update your POA as your circumstances change.
Use a state-specific document. mypoa.ai generates documents with clear, well-defined language that specifies your agent's powers and limitations in compliance with your state's requirements.
Define the Right Scope for Your Needs
Whether you need a general POA, a limited POA, or both depends on your specific circumstances and goals. The important thing is to make a deliberate decision about the scope of authority you are granting and to communicate clearly with your agent about their responsibilities and limits.
mypoa.ai helps you create a power of attorney with the right scope of authority for your situation, whether that means broad financial powers or a more targeted grant of authority. Your download includes detailed signing, witnessing, and notarization instructions to ensure your document is properly executed under your state's laws.