A power of attorney is an incredibly flexible and potentially useful estate planning tool. Understanding what one is, how it works, and how one terminates may help you decide whether including a power of attorney in your estate plan is right for you.

A power of attorney is a legal document wherein you (the “Principal”) give another person (the “agent”) authority to act on your behalf in legal matters. The extent of the authority you convey on the agent is up to you. A general power or attorney grants the agent almost unlimited authority. A limited, or special, POA only grants the agent specific authority as outlined in the power of attorney document. You might, for example, grant an agent the authority to take your place at the upcoming closing on your home because you plan to be out of the country.

As the Principal, you determine when your POA terminates under most circumstances. A traditional power of attorney would terminate upon the death or incapacity of the Principal. Because many people want a POA to work in the event of their incapacity, the durable power of attorney was created. If you create a durable power of attorney it will terminate upon your death but will survive your incapacity. You have the option, therefore, to leave your POA open, meaning it has no termination date, or to create a POA that has a termination date. If you create a limited power of attorney that is only to be used to accomplish a specific task, for example, you might make the POA effective from a specific date to a specific date. As the creator of the power of attorney you may also revoke the powers granted in the POA at any time.

There are some other legal situations that could cause your power of attorney to terminate prior to your intended termination date. A court, for example, could invalidate the document. The death of the agent will also terminate the POA unless a successor agent was named. Divorce is another legal reason why a POA might terminate. In Missouri, for instance, divorce will automatically terminate your POA if you named your ex-spouse as the agent.

Although a power of attorney can be a useful tool it is important that you consult with your estate planning attorney before executing a POA to ensure that you understand the document completely.