A Power of Attorney (“POA”) is a legal document whereby one person, the principal, designates another – the attorney in fact or agent — to act one his or her behalf. The POA provides proof to third parties, such as banks, of the attorney in fact’s authority to act. The principal, in order to create the POA, must have the capacity to contract; as a legal standard, this means the principal must understand the nature and effect of his or her act (See Estate of Joseph J. Zaolino, 1998 WL 34001287 (N.J. App. Div. 1998), unpublished opinion).
There are several varieties of POA. For example, the principal can either limit or expand the power delegated to the attorney in fact. Unsurprisingly, the former variety is deemed a limited POA while the latter expansive type is a general POA.
There are also general durable and springing POAs. Before giving a definition of these two POA varieties, it is important to understand that under common law, a POA became ineffective upon the incapacity of the principal. This is counter-intuitive, as one would expect that a POA is most essential at the principal’s incapacity.
Importantly, there are exceptions: the general durable and springing POAs. A general durable POA is effective despite the principal’s incapacity. As to the springing variety, a general springing POA is effective only if the principal becomes incapacitated.
In order for these POAs to survive incapacity, specific legal language must be employed. If this verbiage is omitted from the POA, the attorney in fact’s authority will not survive the principal’s incapacity.
A general durable POA should state that “this power of attorney shall not be affected by the disability of the principal” so as to survive the principal’s incapacity. The springing variety must state something along the lines of: “This power of attorney shall become effective upon the disability of the principal.” Then, it waits passively until and if the principal becomes incapacitated, only then springing into force.