Limited Power of Attorney is a permission that enables a portfolio manager to carry out particular duties on behalf of the account’s owner. Usually, a LPOA enables them to carry-out an agreed-upon investment plan and handle customary related business without getting in contact with the account owner.
Prior to signing a LPOA, the client needs to be aware of the particular duties they have entrusted to their portfolio manager, as the client stays responsible for the decisions.
Comprehending Limited Power of Attorney
LPOA permissions have become more commonplace recently as more investors decide on investment boutiques and registered investment advisors (RIAs) over conventional brokerage firms.
- A limited power of attorney enables a portfolio manager to make normal decisions without having to contact the account holder.
- The portfolio manager is never allowed to take out money from the account or switch the beneficiaries.
- The account holder may stipulate other exceptions to the LPOA.
- A limited power of attorney, in contrast to a general power of attorney, limits the authority of the named individual to a specific area. In this situation, a portfolio manager is authorized to carry out an investment plan as agreed upon with the holder of the account.
An LPOA provides the portfolio manager the authorization to purchase and sell assets, pay fees, and manage various necessary paperwork.
Specific vital account duties still can be carried out only by the account holder, comprising of cash withdrawals and a switch of beneficiary. A client can plainly state what other powers they may want to keep at the time the account is set-up.
Limited Power of Attorney Types
There are several of variances on the LPOA that could be used in special situations:
- Springing Powers: A LPOA with springing powers turns active only if it is started by a specific event, typically the passing away or debilitation of the owner of the account. It is usually used with a will or a family-living trust.
- Durable and Non-Durable: Durable LPOAs enable the portfolio manager continual authority to carry out specific duties even when the client passes away or becomes debilitated. The bulk of LPOAs are non-durable, meaning they turn void when the client passes away or becomes incapacitated.
Limited Power of Attorney Forms
Clients usually fill out a power of attorney (POA) form when opening an account with a portfolio manager. Many of the forms provide clients with an option to decide between a limited power of attorney or a full power of attorney.
A limited power of attorney limits the authorization to specific areas, like investment management.
The client must name an agent, that is generally the portfolio manager. Other investment managers that make investment decisions on the client behalf are required to also have their details provided on the form. After finished, both the client and the attorney or agent are required to sign the form.
Clients that are uncertain or uneasy about what responsibilities they are giving authorization to, might want to get an attorney to examine the POA form prior to signing it.
Chen, J. (2021, June 7). What Is Limited Power of Attorney (LPOA)? Investopedia. https://www.investopedia.com/terms/l/limited_power_of_attorney.asp.
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