Limited Power of Attorney

A limited power of attorney is a power of attorney that confines the agent's authority to particular matters stated in the document. The person granting it, the principal, chooses what the agent may do, for which property or transaction, and often for how long. Some regions and documents call the same instrument a special power of attorney. It is defined by its scope, in contrast to a general power of attorney that lets the agent handle the principal's affairs across the board, and like every power of attorney it is created and governed by state law.

Scope is the whole point. An agent acting under a limited power of attorney has only the authority the document grants. A grant "to sell my 2019 pickup truck" or "to sign all documents needed to close the sale of 14 Elm Street" does not let the agent open a credit card, move money between bank accounts or sell anything else. That is the attraction for a principal who needs help with one thing and does not want to hand over everything, and it is the first thing a bank, title company or broker reviewing the document checks.

How it fits the uniform act. Virginia is among the states that have enacted the Uniform Power of Attorney Act, and its version draws the same line in its own terms. In Virginia's enactment, a document that grants authority to do "all acts that a principal could do" gives the agent general authority over a long list of subjects, while a document can instead grant authority over particular subjects only. Separately, certain acts, including creating or changing a trust, making a gift, changing rights of survivorship or a beneficiary designation, and waiving the right to a joint and survivor annuity, are allowed only if the power of attorney expressly grants them. Virginia adds a gifting exception: an all-acts grant under Virginia's statute carries authority to make gifts in line with the principal's history of giving. Because each state that adopted the act did so in its own form, and powers of attorney are state law everywhere, the statute of the principal's state is the one that controls.

Limited is not the same as non-durable. Durability is a separate question: whether the authority survives the principal's incapacity. Under Virginia's enactment a power of attorney is durable unless it expressly says it terminates on the principal's incapacity, and that default applies to a limited one too. A limited power of attorney for one closing can therefore remain usable if the principal becomes incapacitated before the closing, unless the document says otherwise.

When it ends. Every power of attorney ends at the principal's death. Under Virginia's statute, a power of attorney also terminates when the principal revokes it, when it provides that it terminates, and when "the purpose of the power of attorney is accomplished", which is the usual end of a limited one: once the closing is done, the authority to close is spent. Writing an end date into the document removes any doubt.

Familiar forms of it. Several documents people sign without thinking of them as powers of attorney work as limited ones. An investment adviser's discretionary trading authority over a client's accounts is one: the SEC's Form ADV instructions give "execution of a power of attorney" as an example of how an adviser assumes that authority. IRS Form 2848 authorizes a named representative to act before the IRS only for the tax matters and years it lists, and the IRS also accepts a state-law power of attorney, including a limited one, if it contains the details its regulation requires.

Using one well comes down to drafting the scope tightly and confirming it will be accepted.

1. Define the scope: the specific act or transaction, the property or account it covers, and any limits, such as a minimum sale price.
2. Set the time: an end date, or a statement that it ends when the transaction closes.
3. Decide durability: whether the authority should continue if the principal becomes incapacitated before the job is done.
4. Sign it under state law, meeting the state's signing, witnessing or notarization requirements, and any recording requirement where it will be used for real estate.
5. Check acceptance in advance with the bank, title company or other party who will rely on it, since some ask for their own form.

For example: Zainab is moving abroad and gives her brother a limited power of attorney "to sell my 2019 pickup truck for not less than $18,000 and to sign the title transfer." He finds a buyer at $19,500 and completes the sale, which is within his authority, and deposits the $19,500 to her account as the document directs. A buyer offering $17,000 would require her own signature or a new document, because the minimum price is part of the grant. And the document gives her brother no authority over her $40,000 savings account, however convenient it might be for him to pay her bills from it.

Pros

• Gives someone exactly the authority a task needs and nothing more.
• Lets a transaction go ahead when the principal cannot be present.
• Easier for a third party to evaluate, because the authority is specific.
• Ends on its own when the task is done, in states following the uniform act's termination rule.

Cons

• Too narrow a grant can fail at the critical moment, for example if the buyer, price or document changes.
• Not a substitute for a durable general power of attorney in planning for incapacity.
• Banks and title companies may ask for their own forms or extra verification.
• Requirements for signing, notarizing and recording vary by state.