Limited power of attorney: Overview, definition, and example
A limited power of attorney is a legal document that grants someone (known as the "agent" or "attorney-in-fact") the authority to act on behalf of another person (the "principal") for a specific task or purpose. Unlike a general power of attorney, which provides broad authority, a limited power of attorney only gives the agent the ability to make decisions or take actions within a clearly defined scope. This can include tasks like signing specific documents, managing certain financial transactions, or handling legal matters related to a particular event or situation.
For example, a business owner might grant a limited power of attorney to a lawyer to sign documents related to a real estate transaction, but the lawyer would not have authority to make broader decisions for the business.
Why is a limited power of attorney important?
A limited power of attorney is important because it allows the principal to delegate specific responsibilities without giving up control over other areas of their life or business. It’s a useful tool when the principal needs assistance with particular tasks but doesn’t want to grant someone full authority. It can also be used to handle matters when the principal is unavailable, incapacitated, or unable to be present for a specific decision or action.
For individuals and businesses, a limited power of attorney helps ensure that the right person handles certain tasks in a legally binding way while still maintaining control over other areas.
Understanding limited power of attorney through an example
Imagine a person is unable to attend a real estate closing due to being out of the country. They can grant a limited power of attorney to a trusted family member or attorney to sign the closing documents on their behalf. This limited power allows the agent to sign the necessary paperwork, but it does not give them authority to make other decisions on behalf of the person, such as managing their finances or making health-related decisions.
In another example, a business owner might give a limited power of attorney to an accountant to handle tax filings for a particular year. The accountant would only be allowed to sign and submit the necessary forms, but they would not have authority to make other business decisions.
Example of a limited power of attorney clause
Here’s how a limited power of attorney clause might appear in a contract:
“The Principal hereby grants a Limited Power of Attorney to [Insert Name], authorizing them to act solely for the purpose of [Insert Specific Task], including but not limited to [Insert Specific Actions]. This power shall be limited to the specified actions and shall expire upon completion of the task or on [Insert Expiration Date].”
Conclusion
A limited power of attorney provides a controlled and specific delegation of authority, allowing someone to act on behalf of another person for a particular task or event. It’s an essential tool for managing specific responsibilities, particularly when the principal cannot be present or available. By using a limited power of attorney, individuals and businesses can ensure that necessary actions are taken without giving up full control over their personal or business decisions.
This article contains general legal information and does not contain legal advice. Cobrief is not a law firm or a substitute for an attorney or law firm. The law is complex and changes often. For legal advice, please ask a lawyer.