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Power of Attorney (POA) Defined – Why Might You Need This Document?


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You’ve probably heard the term “power of attorney” before, but do you know what it means and how it fits into your estate plans? A power of attorney (or POA) can serve a variety of purposes that protect you and help your loved ones in the event of an emergency. 

For example, depending on the type of power of attorney you use, you can name someone to make health care decisions on your behalf, allow a trusted representative to handle your financial affairs, or even choose a loved one to care for your child. 

Learn more about the different types of POAs to determine which is best suited to your situation in this guide. 


What Is Power of Attorney (POA)?

A power of attorney is a legal document used to give someone you trust the authority to represent you and act on your behalf. Some POAs go into effect the moment they’re executed, while others don’t become active until you have lost mental capacity — for example, if you are in a serious accident and lose consciousness for an extended period of time. 


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In a power of attorney, you, the principal, grant powers to a trusted representative called an attorney-in-fact. You can choose to give your attorney-in-fact the legal authority to act on your behalf in all matters (general power) or only in specific areas, like real estate or business (limited power). 


Why Do You Need a Power of Attorney?

There are many reasons having a power of attorney document can prove beneficial. Not only do they protect you and your interests, but they also help your family members, loved ones, and third parties like banks and health care workers to follow your wishes. 

You may need a power of attorney if you’re in one of the following situations. 

1. You Want to Name Your Own Representative

If you have strong feelings about who you want to make decisions on your behalf in the event of an emergency, you should create a POA. If you don’t, the courts may have to establish a conservatorship or guardianship on your behalf. 

This means the courts will choose who has the power to manage your affairs, such as your bank accounts, real estate, or business interests. If you would rather not have a conservator or guardian selected for you, having a power of attorney form in place before you become incapacitated allows you to select the person you prefer to represent you. 

2. You Want a Say in How Your Affairs Are Managed

In a POA, you can not only name an attorney-in-fact to oversee your affairs but also direct them in how you would like them to be managed. If you have specific wishes for how your real estate, business, investments, or even health decisions are handled in the event of your incapacity, a power of attorney lets you dictate which powers you would like to grant your representative, and which you would not. 

For example, you can grant your agent authority to oversee your family home, including paying the mortgage and maintaining the property, but not to sell it. 

If you do have extensive instructions about how you would like your affairs to be managed, make sure to review your wishes with your attorney-in-fact so that they understand exactly what you want. 

3. You Want to Protect Your Representative

In a power of attorney, you name a representative to make a variety of decisions on your behalf. They can oversee your mortgage, pay your bills, use your bank accounts, and more. If you choose a representative without formally naming them in a legal document, they’ll struggle to gain access to your assets, and may even face legal repercussions from attempting to manage your affairs. 

For example, many POAs address whether your attorney-in-fact is allowed to collect payment from your assets in return for managing your estate. After all, managing your interests could take a considerable amount of time and effort. 

Without a power of attorney that explicitly allows your representative to pay themself, they run the risk of being accused of abusing your assets if they attempt to take money from your accounts as payment — regardless of whether you gave them verbal permission to do so.  

A power of attorney helps to protect the personal representative whom you choose, and it also allows them to access your assets with relative ease. It also gives them the authority to communicate with necessary parties, like banks, insurance companies, and health care representatives. 

4. You Want to Help Your Loved Ones

If your loved ones aren’t sure about what you want, they might struggle to oversee your affairs if you lose capacity. Having a power of attorney clearly lays out your wishes and can even help to offer financial security and protection to your family. 

For example, in a POA, you can name a guardian for your children or other dependents, plan an expense budget for their care, or allow gifts to be given to them on your behalf. 

Plus, a power of attorney offers the obvious benefit of giving your family members and loved ones a clear, detailed plan to follow if you become unable to communicate your wishes. 

5. You Travel Often

A POA document isn’t just useful if you fall victim to incapacitation. It’s also useful if you happen to travel often and need someone to manage your affairs when you’re away. 

Having a power of attorney will give your agent the authority to do things like open your mail, pay your bills, and maintain your home while you’re traveling, even if you’re still of sound mind. This is especially helpful if you travel internationally or for extended periods of time and are hard to reach or have limited access to a phone and Internet. 

6. You’re at a Higher Risk of Incapacitation

Some people are at a higher risk of losing mental capacity, such as those who: 

  • Have been diagnosed with a serious illness
  • Work a dangerous job (military personnel, firefighters, loggers, etc.)
  • Are preparing for surgery
  • Have a high-risk hobby, like base jumping or parachuting

While none of these situations mean that you will lose capacity at any point, it’s prudent to prepare for an emergency beforehand, because you’re at a higher risk than the average person. 


How Does Power of Attorney Work?

The process for obtaining and executing a valid power of attorney is relatively straightforward. Here are the steps you will typically need to follow: 

  1. Choose at least one person to represent you (you can choose more than one person if you wish)
  2. Determine which powers you would like to grant them and how you would like your affairs to be managed
  3. Visit a lawyer to discuss which type of power of attorney is best suited to your wishes and situation, and to create your document to ensure it adheres to state law 
  4. Have your document signed, witnessed, and notarized by a notary public (if necessary, based on your jurisdiction)
  5. Distribute copies of your power of attorney to all relevant parties, such as your lawyer, your attorney-in-fact, and your accountant

When your document goes into effect depends on the type of power of attorney you choose and which decisions you want to allow your agent to make. However, once it goes into effect, your agent or agents will be able to use it to act on your behalf. 


Types of Power of Attorney

As mentioned, there are different types of POAs based on factors such as: 

  • The scope of authority you wish to grant to your agent
  • When you want your document to go into effect
  • Which decisions you want to address

Review each type carefully to figure out which power of attorney is best suited to your needs. Speak to a lawyer if you need legal advice regarding your POA or if you need help deciding which one you should make. 

Scope of Authority

The scope of authority in a power of attorney refers to the powers you grant to your attorney-in-fact. You will need to choose between creating a general power of attorney or limited power of attorney, based on whether you want to restrict their powers or not. 

General Power of Attorney

A general power of attorney grants broad powers to your attorney-in-fact. This allows them to make all legal financial decisions, including buying and selling real estate, paying your bills, accessing your bank accounts, and managing any other legal, business, or financial matters.

A general POA is a good choice if you want one person to manage all your affairs for you. 

Limited Power of Attorney

A limited power of attorney, also known as a special power of attorney, grants only specific powers to your attorney-in-fact. For example, you may only allow them to manage your investment accounts, or to oversee your business but not hire new employees. 

A limited power of attorney also can be used for a specific time period, like if you’re traveling abroad for six months and only want to grant someone authority to make decisions on your behalf within that time frame. 

A limited power of attorney is ideal if you only want to grant certain powers to your agent or if you only want to give them power for a specified amount of time. 

When the POA Goes Into Effect

Next, you need to determine when you want your POA to come into effect. This could be immediately, only upon your incapacitation, or strictly for a single transaction. 

Durable Power of Attorney

A durable POA is the most common and typically allows the agent to act on behalf of the principal both before and after they become incapacitated. Durable refers to the fact that the document remains valid even if you lose capacity, regardless of whether the attorney-in-fact was already acting on your behalf. 

It’s important to note that a durable power of attorney doesn’t always come into effect as soon as it is executed. It can either come into effect immediately or upon the incapacitation of the principal. 

It remains in effect until it is either revoked or you pass away. 

Nondurable Power of Attorney

A nondurable POA form is typically used for single transactions or acts. For example, you may use a nondurable power of attorney to allow someone to represent you in court on a single, specified day. Or you could use it to grant an agent a single, ongoing power, like cashing checks in your name. 

Once the transaction has been completed or the specified date has passed, the power of attorney is no longer valid. 

A nondurable POA also expires when you, the principal, become incapacitated. 

Springing Power of Attorney

A springing POA usually only comes into effect when you lose mental capacity, such as if you’re in a serious accident or you suffer a debilitating medical condition. This means the agent you name won’t be able to act on your behalf until you are unable to do so for yourself. 

A springing power of attorney doesn’t always have to come into effect when you lose capacity, though. It typically comes into effect as soon as the conditions you outline are met. For example, you could draw up a POA that comes into effect once you lose the ability to communicate verbally or when you decide to move into an assisted care facility. 

What Decisions the POA Covers

There are different POA documents for different situations. Which you use depends on your personal situation and any dependents, health issues, or beneficiaries you have. The most common forms of power of attorney are medical, financial, military, and child care. 

Medical Power of Attorney

A medical power of attorney, sometimes referred to as a living will or health care POA, is a document that allows you to designate someone to make medical decisions on your behalf. This includes: 

  • Whether to resuscitate you in the event of heart failure
  • If you should be put on or taken off life support
  • Which medical procedures and treatments health care professionals may use

Depending on where you live, a medical POA may allow you to outline your personal preferences for your agent to follow. In some states, you may have to create both a medical power of attorney and a health care directive to name an agent and to dictate your personal wishes regarding your medical care. 

Financial Power of Attorney

A financial power of attorney grants someone the authority to make financial decisions on your behalf. This means any and all decisions related to your real property, bank accounts, investments, debts, financial institutions, and so on. 

Military Power of Attorney

A military power of attorney is virtually the same as a financial power of attorney, but it is used by service members when they are deployed. Some military power of attorney forms also address medical preferences and child care and can either come into effect upon the principal’s incapacitation or once they leave for deployment. 

Service members can typically access military POAs and estate planning resources through their base’s legal assistance attorney. 

Child Care Power of Attorney

A child care power of attorney temporarily grants legal guardianship of your children to someone who is not their primary caregiver. They’re typically used when: 

  • You are traveling for work without your child
  • Your child will be traveling with a grandparent, aunt, uncle, or family friend without you
  • You are having a medical procedure and your child will be staying with a loved one
  • You are divorced or separated and the other parent, who is not the primary caregiver, will be taking your child on a trip or caring for them for an extended period of time

A child care power of attorney virtually always has an end date and is not meant to replace or act as permanent guardianship. 


How to Choose Your Agent (Attorney-in-Fact)

Choosing an agent is a decision that needs to be taken seriously. While it may seem overwhelming, here are some tips to help you make your choice. 

Different POAs have different requirements in terms of who can act as an agent. For example, in a medical power of attorney, some states don’t allow your personal physician or residential health care provider to act as your agent. 

Typically, though, any representative you choose to act on your behalf: 

  • Needs to be of legal age in your state
  • Cannot currently be in a state of bankruptcy
  • Cannot be the owner of a care home where you live or receive treatment

2. Pick Someone You Trust

Your agent will have a lot of power and responsibility when it comes to overseeing and managing your affairs. This makes it of the utmost importance to choose someone you trust to follow your wishes to the best of their abilities. 

It also helps to name someone whose views align with your own. For example, choose someone whose business sense matches yours to run your company, or someone who shares your religious beliefs to make informed medical decisions on your behalf. This will make it easier for them to act for you in specific circumstances where your preferences haven’t been outlined or specified. 

Your agent should also be mature and responsible enough to handle the weight of making decisions for you without becoming overwhelmed. This is especially important when it comes to health care decisions, which can be extremely stressful and difficult to make. 

3. Ask Them in Advance

Before you name an agent in your POA, ask the person you’ve selected whether they’re willing to act on your behalf. Go over the duties and responsibilities you expect them to take on and review your personal preferences and wishes. Make sure that they understand exactly what they would be taking on and give them an opportunity to decline. 

You should never name someone as an attorney-in-fact without letting them know in advance. They have a legal right to decline the role, even if you become incapacitated, which would mean you could end up with a court-appointed guardian or conservator even if you created a POA. 

Keep your chosen attorney-in-fact updated on your estate plans and if they change over time. 

4. Choose Someone Who is Financially Responsible

Because many POAs cover financial matters, it makes sense to choose an agent who has proven to be financially responsible in the past. Otherwise, you risk having your assets mismanaged. 

For example, don’t choose someone who has a lot of debt or who has a history of bankruptcy or poor spending habits. While your agent will have a fiduciary duty to act in your best interest, that doesn’t mean that they’ll necessarily have the financial expertise or knowledge to do so. 

5. Go With a Professional

When in doubt, go with a professional attorney-in-fact, like a trusted lawyer, financial advisor, or accountant. Although family members and loved ones can serve as your agent, they may not always be the best choice. 

If you feel like your affairs would be better managed by someone else, or you want to take some of the burden from your family, consider the different professionals in your life. 


Power of Attorney FAQs

Before creating your POA, it’s important to understand exactly what it will mean for both you and your assets. Here are some of the most common FAQs about POAs. 

What Are the Risks of Naming a POA?

If you choose the right type of power of attorney, and the right agent to act on your behalf, there aren’t many downsides to making one. Especially if you’re in a situation where you need one immediately or you’re at a higher risk of needing one in the future. 

But, if you choose the wrong type of POA or you name an untrustworthy attorney-in-fact, you could end up with a mess on your hands. 

For example, if you create a durable power of attorney that’s meant to go into effect on the date of its execution and you name an agent who is irresponsible and ignores their fiduciary duty, they’ll be able to use any of the powers they have been granted in the document from day one. This means they could start cashing checks, selling property, or ignoring your health care wishes. 

This is why choosing a good agent to act on your behalf is of the utmost importance. It’s also prudent to carefully consider which powers you give to your agent and when your POA goes into effect. 

If you’re uncertain about how best to protect yourself, speak with a lawyer to review your options and create a power of attorney that’s specific to your needs and situation. 

What Decisions Can’t Your Agent Make?

Your agent is only allowed to make decisions related to the powers you grant them. If you grant your agent general powers, they’ll be able to make virtually all financial decisions on your behalf. If you grant them limited powers, they’ll only be able to act on your behalf in the ways as outlined in your document.

An attorney-in-fact is also only allowed to make legally sound decisions. That means that if you grant them general powers, even though they have control over your affairs, they must still operate within the law. 

Can I Revoke My POA?

Yes, you can revoke a power of attorney document. To do so, you will need to create a revocation of power of attorney document and distribute it to all relevant parties. Retrieve any copies of your previous power of attorney and destroy them. 

Once you have a new power of attorney document in place, give the latest version to your attorney-in-fact, estate lawyer, spouse, and any other relevant individuals or institutions. Don’t forget to update any estate planning documents you keep in a safety deposit box or safe. 

Can I Name Multiple Agents?

Yes, you can name multiple agents in your power of attorney. However, it is recommended that if you decide to name multiple representatives, you choose individuals who work well together and whom you trust to manage your affairs. 

Make sure to discuss your wishes with all your agents and allow them to decline or withdraw if they aren’t comfortable. 

What Happens if My Agent Dies?

Many power of attorney documents will allow you to name both a primary agent and at least one backup. It’s recommended that you do so in case your initial agent passes away after you become incapacitated. 

If your agent dies and you haven’t named a backup, you will need to designate a new one. The best way to do so is to revoke any existing power of attorney documents that you had and to create a new one with a new agent. Once you have executed the new document, redistribute it to all relevant parties. 

What’s the Difference Between an Attorney-in-Fact and an Executor?

While an attorney-in-fact acts on your behalf while you are alive, an executor manages your estate after you die. Similar to a POA, an executor is named as your personal representative in a will and works to ensure that your assets are distributed according to your wishes. 

You can name the same person to act as your agent and your executor, or you can choose two different people. However, their duties and responsibilities are quite different, and only naming one won’t negate your need to name the other. 

For example, if you only name an agent in your power of attorney and don’t create a will with an executor, no one will know who your beneficiaries are and what you would like done with your belongings after you die. Your estate is also likely to end up in probate, where the courts will decide who to leave your estate to and how it will be distributed. 

A will comes into effect when you die, whereas a POA is no longer valid after death. 


Final Word

Creating a power of attorney is helpful to many people in many different situations. From long-term and international travel to partaking in risky hobbies or working a dangerous job, a POA offers you peace of mind and control over your assets if you’re unable to manage them yourself. 

Whether you create a power of attorney for a specific reason, or you make one alongside a will and letter of understanding as part of your estate plans, make sure you understand exactly what you’re getting into. Choose the type of POA you use wisely, and carefully consider both who you name as an agent and when your document comes into effect for the best outcome. 

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Brittany Foster is a professional writer and editor living in Nova Scotia, Canada. She helps readers learn about employment, freelancing, and law. When she's not at her desk you can find her in the woods, over a book, or behind a camera.

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