So, you have decided that you need a financial power of attorney. The next step is to decide what powers that attorney-in-fact/agent should have.
A power of attorney can be very limited in scope, or it can be extremely broad. A broad power of attorney authorizes an agent to have access to, and to make or incur transactions to, from, or related to the principal’s bank accounts, certificates of deposit, real estate, personal property, stock, insurance policies, retirement accounts, pension, revocable trusts, safe deposit boxes, etc. If the principal is uncomfortable with such broad authority, he or she must limit the agent’s power, even if the principal is uncomfortable with only one specific action (such as prohibiting the designation of a new beneficiary on a life insurance policy).
In contrast to a broad power of attorney, a limited power of attorney may authorize the agent to do only one or a specific number of actions, such as to contract for replacement windows in the principal’s primary residence and to incur a loan, if necessary, to pay for those windows, but nothing more. To highlight the difference, consider the following example: In 2001, the principal lived in Arizona and owned a house on 2 acres of land. In 2006, the principal moved to North Carolina and now considers North Carolina to be her primary residence. However, the principal still owns the Arizona real estate. Due to the principal’s great physical distance away from the Arizona real estate, she would likely benefit from appointing an agent in Arizona have broad authority with respect to the property, including, but not limited to, management of the property, maintenance of the physical appearance of the property, entry into leases with prospective tenants, availability to make or contract for repairs to be made to the property, or ability to sell the real estate. A limited power of attorney may specifically authorize the agent to only manage the Arizona property for instance, and as a result, no authority would be granted under such limited power of attorney to allow the agent to sell the house.