A limited power of attorney grants your agent the right to act on your behalf. While in a general power of attorney, you entrust your agent with all the rights, a limited power of attorney only provides them specific rights, hence the name, limited.

Let’s explore more about the limited power of attorney in this article.

Understanding Limited Power of Attorney

The limited power of attorney (LPOA) works as an authorization that entrusts the portfolio manager to operate on their client’s behalf. This authorization extends to certain functions only and is based on an agreed-upon strategy. However, at the end of it, the client will be held responsible for all the operations done on their behalf.

As compared to its counterpart, the general power of attorney, the limited power of attorney form only limits the portfolio manager to a particular sphere. In this case, they have the freedom to buy or sell assets on the client’s behalf, pay some fees, and also manage certain forms.

There are three key features to note about the limited power of attorney:

  • The LPOA enables the portfolio manager to take up some routine decisions or operations, without having to consult the client.
  • The LPOA restricts the portfolio manager from withdrawing money on their client’s behalf or making changes to their list of beneficiaries.
  • Apart from the usual process, the account holder can add other restrictions and allowances in the LPOA before signing the form.

Types of Limited Power of Attorney

There are essentially three different kinds of limited power of attorneys templates that can be signed between the account holder and the portfolio manager.

Springing Powers

This is one of the most common types of limited power of attorney. In this case, the contract between the account holder and the portfolio manager remains intact, but inactive for a long period, until an event triggers it.

Usually, the manager will not be able to act on the client’s behalf unless the latter becomes unable to make decisions. This mostly takes place when the account holder becomes incapacitated or in the event of their death. The most common instance of an LPOA use here is related to a will or trust.

Durable Power of Attorney

This is a special type of a limited power of attorney whereby the portfolio manager has continuing authority to act on the client’s behalf on certain specific lines of function. This extends for an unlimited period, and usually, the authorization does not cease at the death or incapacitation of the account holder.

Non-Durable Power of Attorney

This is another common type of the limited power of attorney. Here, the portfolio agent can continue to work for the account holder for a long time, but this authorization becomes void when the latter dies or becomes incapacitated.

How to Make a Limited Power of Attorney?

Step 1: Decide On The Powers Of The LPOA

The first step includes writing down all the powers being vested on the portfolio manager. This would include all the functions and tasks to act upon, the period for the LPOA, and other considerations.

Step 2: Choose The Agent

Since the agent would be acting on the account holder’s behalf, it is important to choose someone the latter can trust. This could even include friends or family. In the situation that the high-stake assets are included in the LPOA, it would be a good idea to get the beneficiary to work as the agent.

Step 3: Write The Limited Power Of Attorney

The LPOA form requires you to follow strict instructions. Essentially, it must describe the responsibilities of the portfolio manager in black and white. Additionally, two copies of the form should be used.

Step 4: Sign The LPOA Form

Finally, the agent and the account holder would be required to sign the form, following the State Laws, in the presence of a notary public, witnesses, or both.

Parts Of A Limited Power Of Attorney Form

  • Basic information - This first part of the form involves the agent and the account holder’s basic details like name, social security numbers, address, and contact details.
  • Powers – This segment lists out all the powers that are vested on the portfolio manager. There could be a total of three such action items.
  • Revocation - This features the condition when the authorization would be revoked. The termination could take place on a particular date or be triggered by the occurrence of an event, or on the will of the principal.
  • State – The limited POA is governed by the rules of the state it is signed in. Hence, this segment contains the name of the state.
  • Appointment acceptance – The portfolio manager signs in this part of the LPOA form to confirm that they will act in accordance with the conditions mentioned in this document.
  • Witness – The principal produces two witnesses to put in their names and sign on the LPOA form, to acknowledge the contract.
  • Notary Public – The local notary at the local bank will finally acknowledge the form and put in their name, signature, and date.

Special Considerations in the Limited Power of Attorney

In most cases, the limited power of attorney ceases to exist at the death of the account holders or their incapacitation, as dictated by a non-durable Power of Attorney.

However, based on special considerations, a durable power of attorney can be utilized, whereby the agent continues to act on the client’s behalf even in the situation of the client’s death or incapacitation. In the situation that a person becomes unable to make decisions on their own and does not already have a durable power of attorney, the State has the right to assign guardianship to take actions on their behalf.

More often than not, the LPOA forms are used to create non-durable authorizations that enable the agents to act on their client’s behalf. These forms are signed following the rules of the particular state. The portfolio manager has the authority to get the limited power of attorney PDF reviewed by an attorney in case of uncertainties or discrepancies.

CocoSign has a library of free limited power of attorney forms that the account holder could make use of while assigning a portfolio manager. We feature a limited power of attorney template based on different purposes or kinds of power of attorney, while also allowing you to customize them as per your needs.

Disclaimer

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