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Part I of II: Powers of Attorney Explained

Posted by Jessica Mantekas | Nov 30, 2023

The concept of a Power of Attorney has been around for centuries. Common misconceptions have developed over the years as to what exactly a Power of Attorney is and the distinctions among various types of Powers of Attorney.  In Part I of this two-part blog, we explain powers of attorney and then define General Powers of Attorney, specifically.  We will discuss Health Care Powers of Attorney in an upcoming Part II.

What is a power of attorney?

A power of attorney is a legal document created by one person for the purpose of giving authority to another to act on their behalf, usually so that a court-appointed guardianship proceeding can be avoided.  The person creating the power of attorney is called the Principal, and the person receiving the authority is called the Agent.  The power of attorney is the legal document itself which describes the terms of the Agent's authority, and that authority can range from extremely broad powers to one specific or limited purpose. 

What is a General Power of Attorney?

With this legal document, the Principal gives broad authority to one or more Agents to handle financial matters on their behalf.  The powers granted to an Agent under a General Power of Attorney commonly allow the Agent to use broad discretion with respect to managing the Principal's real estate interests, investments, bank accounts, business interests, insurance, retirement plans, lawsuits, personal and family maintenance, government benefits, and taxes, among other financial matters.  Another significant power typically granted to an Agent under a General Power of Attorney is the power to make gifts from the Principal's assets for various reasons.  Gifting powers, however, are often limited so that an Agent cannot gift amounts which would otherwise be inconsistent with the Principal's wishes without subjecting the Agent to potential liability.

Why are some called “Durable”?

The term “durable” in reference to a Power of Attorney means that the Agent's authority to act on behalf of the Principal does not terminate when the Principal is deemed incapacitated.  General Powers of Attorney, as described above, are most often also “durable.”

In contrast, the term “springing” in reference to a Power of Attorney means that the Power of Attorney only comes into effect when the Principal is deemed incapacitated.   Springing powers can cause unexpected obstacles for the Agent when they actually try to utilize the Power of Attorney document.  The Agent would have to take additional and often time-consuming steps to obtain evidence (e.g. from a medical professional) to prove the Principal's incapacity before being able to utilize the Power of Attorney, while in the meantime leaving the Principal's affairs unattended. It is also not always entirely clear whether someone is incapacitated. 

Under current law, all North Carolina Powers of Attorney are presumed to be durable unless stated otherwise.  Nevertheless, any Power of Attorney prepared prior to 2018 when that was not the case should be reviewed.

How do you terminate a Power of Attorney?

Pursuant to North Carolina law and the terms outlined in the Power of Attorney, the document usually will stay in effect until the earliest of the following:

  • The death of the Principal;
  • The death, incapacity, or resignation of the Agent and all successor Agents appointed; or
  • The revocation of the Power of Attorney by the Principal or the Principal's Guardian.

Our attorneys are available to discuss the various powers of attorney and advise as to the best way to structure a General Power of Attorney.  Please contact out office if you wish to discuss reviewing, updating, or establishing a power of attorney, and stay tuned for Part II of this blog for specifics related to Health Care Powers of Attorney.

About the Author

Jessica Mantekas

Associate Attorney

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