A power of attorney is a versatile legal document that gives someone the legal authority to act on behalf of another in time of need. That need could be temporary or life-long. The need could be financial, medical, or something else.
Table of Contents
“Who needs a power of attorney?” Let’s look at the types of decisions an agent has the authority to make on behalf of the principal. (A “principal” is the person who drafts the POA. An “agent” is the person to whom they give authority.)
Authority to Make Decisions When a Person Is Out of the Country
American citizens who travel, live, or work outside the U.S. may want a general power of attorney to give someone in the U.S. the authority to act on their behalf. This group includes:
- Members of the military
- Military families stationed overseas
- Business people who travel for work
- Any traveler who is concerned that a financial decision may need to be made in their absence
With a general power of attorney, an agent can make any decision they are legally allowed to make. That could include how to get a traveler home if they became incapacitated while overseas.
For people who live overseas, a U.S.-based agent often handles financial matters. They may have a financial power of attorney rather than a general power of attorney. Either document would allow them to handle financial matters such as:
- Choosing financial institutions
- Opening and closing bank accounts, making deposits and withdrawals
- Investing money
- Paying taxes
An agent — also called an attorney-in-fact — might even be able to sue on behalf of the principal if the power of attorney allows it.
Authority to Make Decisions in Situations of Mental or Physical Incapacity
A medical power of attorney allows someone to make medical decisions in case of mental or physical incapacity. This would be particularly important for:
- Parents of older teens with mental impairments. When the teen reaches the age of majority, no one will have the authority to make decisions for them if they cannot.
- Persons with ongoing mental health challenges who sometimes or often need assistance
- Elders who are in the early stages of dementia or Alzheimer’s
A power of attorney can bring great peace of mind to family members worried about the future needs of a loved one.
A medical power of attorney allows the named agent to make healthcare decisions. Those decisions may be guided by instructions in a living will or healthcare directive.
If the power of attorney document specifically states it, the agent can transfer property from a disabled spouse to a healthy spouse. This protects Medicaid eligibility for the disabled spouse and the quality of life for the healthy spouse.
If a loved one is suffering from a life-long impairment, a durable POA gives an agent authority to act for the lifetime of the principal. If the principal may outlive the agent — as may be the case with parents of a disabled teen — successor agents should be named.
Some people prefer a springing power of attorney document. This type of POA authorizes decision-making power when certain conditions are met. For example, the person drafting the POA may state that it becomes effective if they are declared mentally incompetent.
A springing power of attorney may create time delays because someone will have to determine mental capacity.
Failing to have a power of attorney in place prior to incapacitation could result in a guardianship or conservatorship suit being brought to probate court.
Authority to Conduct Business on Someone’s Behalf
A durable power of attorney would allow someone to consistently act as a fiduciary on the business owner’s behalf. A limited power of attorney gives an agent authority for specific transactions.
An agent can:
- Buy or sell real estate
- Sign a business contract
- Collect on debts
If an agent will be completing real estate transactions, the document must state that the agent has this authority.
When Planning for Potential Future Needs
People with dangerous jobs or risky hobbies could foresee the possibility of catastrophic injury. Ensuring someone can make financial decisions or medical treatment decisions is a reasonable precaution.
But you don’t have to be a risk-taker to need a “backup” person in times of crisis. Anyone could be incapacitated by a car accident or a serious illness.
A spouse is that backup person for their husband or wife. They have the legal authority to make decisions on all matters. A power of attorney document gives single people that trusted backup person to make decisions for them.
The drafter of the POA can decide whether they want to give someone authority over financial affairs or medical care.
A power of attorney can always be revoked as long as the principal is of sound mind. Depending on your state’s laws, revocation can be as simple as the destruction of the POA document, or you can draft a new POA.
Considering a Power of Attorney? Get Legal Advice
It’s not strictly necessary for a person to hire a lawyer to draft a power of attorney. A simple, cost-effective power of attorney can be created using FindLaw’s Estate Planning Forms.
But you may feel more comfortable talking with an elder law or estate planning attorney about specific legal requirements under your state’s laws.