What Do "General Authority" and "Specific Authority" Mean in a Financial Power of Attorney?

Financial powers of attorney (POAs) can be an invaluable tool in your estate planning toolkit. Their usefulness lies in their versatility: You can draft POAs to meet a wide range of financial needs.

Under the Uniform Power of Attorney Act (UPOAA), adopted by a number of states, you can grant general authority to your agent (also known as your attorney-in-fact) to manage your financial affairs in certain subject areas, as well as specific authority to undertake certain specific financial activities. This article explores the differences between these two types of authorities and why you might or might not want to limit an agent's authority.

What Does General Authority in a POA Mean?

When you grant general authority to an agent in a financial POA, you're giving them broad powers to manage the subject area you're granting them general authority over, such as the following.

Real Property

Your agent's general authority over your real property matters includes, for example, the power to sell real estate you own or obtain a mortgage on your property.

Personal Property

A general authority over personal property would give your agent the authority to manage your personal property, including taking actions such as purchasing personal property on your behalf and obtaining valuations or assessments of your property.

Investments

With general authority over your investments, an agent has the power to, for example, purchase stocks for your portfolio, exercise the voting rights attached to stocks you own, or terminate your option accounts.

Banking

An agent with general authority over your banking would be able to engage in banking transactions on your behalf. For example, they could make withdrawals from your bank accounts to pay bills or borrow money in your name.

Business Operations

Giving your agent general authority over your business operations lets them step in to manage your business if you lose the capacity to do it yourself. They could, for example, fulfill contracts your business has entered into and manage your payroll.

Insurance and Annuities

With general authority over your insurance or annuities, your agent can do things like pay the premiums owing on your insurance or purchase an annuity for your spouse.

Estates and Trusts

By granting general authority to your agent over estates, trusts, or other beneficial interests—for example, escrow or a fund from which you're entitled to a share or payment—your agent will be able to perform actions such as transfer property you own into a revocable trust you previously created or use payments you receive from a fund.

Claims and Litigation

Under the power of general authority, your agent would be able to step in and manage your litigation matters, such as bringing an action or accepting a service of process on your behalf.

Personal and Family Maintenance

With general authority over personal and family maintenance, your agent can do things such as pay your day-to-day expenses as well as those of family members you're supporting. For example, they can continue making mortgage payments, pay for house repairs, or make child support payments.

Government Benefits

A general authority gives your agent the power to manage your government benefits, such as collecting Social Security or Medicare benefits on your behalf.

Retirement Plans

When granted general authority in this area, your agent has the power to manage your retirement benefits, including individual retirement accounts and pension benefits you're entitled to under an employer's plan.

Taxes

Your agent would have the authority to manage your tax affairs by filing your tax returns and communicating with state or federal tax authorities on your behalf.

What Does Specific Authority in a POA Mean?

Under the UPOAA, you need to grant your agent specific authority if you want them to be able to do certain financial activities, even though these activities might fall within one of the financial areas outlined above that you can grant them general authority over.

Living Trusts

Also known as an inter vivos trust, you will need to expressly grant your agent the authority to create, amend, invoke, or end or terminate any living trust you've created.

Gifts

Your agent cannot make gifts of your assets unless they're given the express power to do so in your POA.

Rights of Survivorship

Rights of survivorship arise in various types of jointly owned property. You will need to give your agent specific authority if you want them to be able to either create or change a right of survivorship.

Beneficiary Designation

Your agent can't create or change a beneficiary designation (for example, in an insurance policy) unless you've given them the specific authority to do so.

Delegation of Authority Under the POA

If you want your agent to have the power to authorize someone else to act under your POA, they will need to be expressly granted this power.

Waiver of Right To Be a Beneficiary

You will need to grant your agent specific power to waive your right to be a beneficiary of a joint and survivor annuity. This includes any survivor benefit you may be entitled to under a retirement plan.

Fiduciary Powers

A fiduciary power is a power that must be exercised in the interests of someone else. If you hold a fiduciary power that you are entitled to delegate, you have to grant your agent specific authority if you want them to exercise that fiduciary power.

Refusal of Interest in Property

If you want your agent to be able to refuse an interest in property—for example, an inheritance—you will need to give them the specific authority to do so.

Limiting or Not Limiting Your Agent's Authority

In many situations, it can make sense to grant your agent general authority over all or several of your financial matters. Still, there are scenarios where you might want to limit your agent's authority by modifying their general authority.

For example, if you're going to be out of the country, you might want to grant your agent the general authority to manage your real property so that they can sign any necessary papers on your behalf. But if you don't want your agent to sell any of your properties while you're away, you can modify the general authority you're giving them to include this restriction.

Since general authority doesn't include the authority to do the things that require specific authority, you will need to grant specific authority if you don't want your agent to be limited. For example, you might want your agent to be able to delegate someone else to act under the POA if they ever find themselves in a situation where they need to, such as when they don't have the expertise to handle a financial matter that comes up. In such a scenario, you'd want to remove the limitation by granting them the specific authority to delegate.

The financial POA is a useful tool for helping you manage your financial affairs. Knowing the areas over which you can grant general authority and the financial activities that require specific authority will help you work with your estate planning attorney to craft POAs that meet your financial needs.