Limited Power of Attorney

A Limited Power of Attorney, sometimes called a special power of attorney, is a legal document and type of power of attorney that’s narrow in scope and applies only to specific matters for a limited duration of time. It’s very different from a General Durable Power of Attorney which confers broad authority to the principal’s agent, usually over a long period of time.

In Texas, it’s becoming commonplace for third parties in some settings to reject a durable power of attorney and require a limited power of attorney. Third parties want the assurance offered by a limited power of attorney that a principal’s agent has the authority and power to act in a specific, narrowly-defined transaction during a definite timeframe.

By relying on a limited power of attorney, third parties like the fact that they:

• can manage their exposure to risks associated with broader, undefined powers that could potentially lead to misuse or misinterpretation;
• can mitigate the risk of participating in what could be unauthorized actions performed by an agent, whether those actions are intentional or unintentional;
• can ensure the agent’s authority aligns precisely with the principal’s intentions and the third party’s requirements;
• can better control the legitimacy and accountability of the underlying transaction; and, 
• can reduce or remove potential liability that might attach to a third party.

For example, in a real estate buy/sell transaction, a title company might require a limited power of attorney that’s been written to specifically address every aspect of the closing process. Once that transaction has closed, the limited power would no longer have practical value because its only functions were finite and fixed to the buy/sell, now completed.

A bank might decline a durable power of attorney when a principal’s agent presents it to the bank to access the principal’s safe deposit box. The bank might instead require a recently-executed and limited power of attorney from the principal that explicitly authorizes the agent’s activity at that bank, and specific to the safe deposit box at that bank. Given the choice between a durable power of attorney and a special or limited power of attorney, the bank will likely ask for the limited power. By relying on the limited power, the bank is protecting itself and its customers from unauthorized access and possibly, theft.

In Texas, a principal’s simultaneous use of a limited power of attorney and a durable power of attorney does not inherently create a conflict. The tools serve different purposes and can certainly coexist, depending on the specific needs and intentions of the principal. A durable power of attorney remains effective even if the principal becomes incapacitated. A limited power of attorney grants the agent authority to perform specific acts or functions on behalf of the principal for a limited time or under specific circumstances — which would likely not include a time during the principal’s incapacitation.

Both types of powers of attorney are tools that give the principal a great deal of flexibility in estate planning and personal affairs management. To prevent conflict between the terms and intentions of the two powers, you should contact a knowledgeable estate planning attorney to ensure both documents are aligned and clearly drafted to define the powers, scope, and limits of authority granted to the agents.

As experienced estate planning lawyers, we at Reagan Moore frequently prepare limited powers of attorney. Our first step is to ask our client to describe their objectives.  Understanding their goals will shape our strategy for them. We’re here to discuss your options.