A power of attorney (POA) is a legal document authorizing someone to act on your behalf in financial, legal, or healthcare matters. The person granting authority is the principal; the person receiving it is the agent or attorney-in-fact. Powers of attorney are essential planning tools that ensure someone can manage your affairs if you become unable to do so.
Without a power of attorney, family members may face expensive court proceedings to gain authority over an incapacitated person's finances or healthcare decisions.
Why You Need a Power of Attorney
If you become incapacitated—through illness, injury, or cognitive decline—someone must handle your affairs. Bills need paying, bank accounts need accessing, medical decisions need making. Without POA authorization, even your spouse may not have legal authority to act on your behalf.
The alternative is guardianship or conservatorship—court-supervised arrangements that are expensive, time-consuming, and involve ongoing judicial oversight. A POA avoids this by designating someone in advance.
POAs aren't just for the elderly. Accidents and sudden illnesses can affect anyone. Having documents in place provides peace of mind at any age.
Types of Powers of Attorney
General power of attorney grants broad authority to handle financial and legal matters—banking, investments, real estate, taxes, and business affairs. The agent can do almost anything you could do yourself.
Limited or special power of attorney restricts authority to specific actions or transactions—selling a particular property, managing a specific account, or handling matters during a defined time period.
Healthcare power of attorney (also called healthcare proxy) authorizes medical decisions—treatment choices, end-of-life care, facility selection. This is separate from financial POA because different expertise and judgment may be needed.
Durable vs. Non-Durable
The critical distinction is durability. A durable power of attorney remains effective even if you become incapacitated—which is precisely when you need it most. Non-durable POAs terminate upon incapacity, making them useful only for temporary arrangements while you're competent.
For estate planning purposes, durable POAs are essential. The word "durable" (or specific statutory language) must appear in the document for authority to continue through incapacity.
Some durable POAs are "springing"—they only take effect upon incapacity. Others are immediate—effective upon signing. Each approach has advantages and risks.
Choosing an Agent
Select someone you trust completely. Your agent will have significant power over your finances and potentially your life. Choose based on trustworthiness, competence, availability, and willingness to serve.
Consider naming successor agents in case your first choice cannot or will not serve. Some people name co-agents who must act together, providing oversight but potentially creating coordination challenges.
Agents have fiduciary duties—they must act in your best interest, avoid self-dealing, and keep records. But enforcement depends on oversight. Choose carefully.
Powers and Limitations
POA documents can be customized to grant or restrict specific powers. Consider whether your agent should be able to make gifts (including to themselves), change beneficiary designations, access digital accounts, operate businesses, or engage in certain financial transactions.
Some powers require specific authorization to be effective. Many states require explicit language for certain actions like creating trusts, making gifts, or changing beneficiaries. Generic "all powers" language may not suffice.
Financial institutions may have their own POA forms or requirements. Banks sometimes refuse to honor POAs they didn't prepare. Ask institutions where you have accounts about their specific requirements.
Creating a Valid POA
POA requirements vary by state. Generally, you must be competent when signing, the document must be signed and dated, and witnesses and/or notarization may be required. Some states have specific statutory forms that, if followed, must be accepted.
Consider having multiple original copies—financial institutions may require original documents. Keep copies in accessible locations and inform your agent where to find them.
Revoking a Power of Attorney
You can revoke a POA at any time while competent. Written revocation, delivered to your agent and any institutions holding copies, is the proper method. Simply destroying your copy doesn't revoke authority—the agent may still have copies.
POAs typically terminate upon the principal's death. After death, the executor of your estate (not your agent) handles your affairs.
Getting Legal Help
POAs are powerful documents that deserve careful drafting. An attorney ensures your POA meets state requirements, includes appropriate powers for your situation, and coordinates with your overall estate plan. Generic forms may not address your specific needs or comply with your state's laws. For something this important, professional guidance ensures your documents work when you need them.