What Is a Power of Attorney?

A power of attorney document allows someone (the “principal”) to name someone else (the “agent” or “attorney in fact”) to act in their place. You can name an agent to handle your financial affairs in a financial power of attorney and name an agent to follow your advance health care directive and make medical decisions for you in a healthcare power of attorney.

A durable power of attorney allows someone to act as a fiduciary on the principal’s behalf until the principal revokes the POA. A durable power of attorney form means the agent’s authority continues after the principal’s incapacitation. If a power of attorney is not durable, the agent’s authority ends if the principal becomes incapacitated.

The principal decides what authority to grant, whether that is over financial affairs or medical care.

The principal can always revoke the power of attorney as long as the principal is of sound mind. Depending on your state’s laws, revocation can be as simple as destroying the POA document or drafting a new POA.

When Is a Power of Attorney Helpful?

If You Are 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
• Expatriates
• Business people who travel for work
• Any traveler concerned that financial decisions must 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 getting 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 only 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.

If You Are Mentally or Physically Incapacitated

A medical power of attorney allows someone to make medical decisions in case of mental or physical incapacity. Your agent makes healthcare decisions guided by your instructions in a living will or healthcare directive if you have one.

A financial power of attorney allows someone to make financial decisions and manage financial affairs if they are unable due to incapacity.

Some people prefer a springing power of attorney document. This type of POA authorizes decision-making power upon a specific time or event. For example, the principal may state that it becomes effective if they are declared mentally incompetent. However, a springing power of attorney may create time delays because someone must determine mental capacity.

Failing to have a power of attorney before incapacitation could result in a guardianship or conservatorship suit in a probate court. The court may not appoint the person you want as your agent. It is a good idea to put one in place before you need it.

If Your Loved One Has Mental or Physical Challenges

A power of attorney can bring great peace of mind to family members worried about the future needs of a loved one. This is particularly important for:

• Children with mental or physical impairments. When the child reaches the age of majority, who will act for them if they cannot?
• Persons with ongoing mental health challenges who need assistance
• Elders who are in the early stages of dementia or Alzheimer’s

If a loved one suffers from a life-long impairment, a durable POA gives an agent authority to act for the principal’s lifetime.

The agent may protect your loved one by managing their affairs and applying for benefits. For example, if a 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 You Want Someone To Handle a Specific Transaction

However, someone may want a limited power of attorney to give an agent authority for a specific transaction, such as:

• Buying or selling real estate
• Signing a business contract
• Collecting on debts

If an agent handles real estate transactions, the document must state that the agent has this authority.

If You Plan for Future Needs

People with dangerous jobs or risky hobbies could foresee the possibility of catastrophic injury. Or if you were diagnosed with a terminal illness or a mental disability such as dementia or Alzheimer’s. Ensuring someone can make financial decisions or medical treatment decisions on your behalf is a reasonable precaution.

But you don’t have to be ill or a risk-taker to need a “backup” person in times of crisis. Anyone could face incapacity or serious illness.

If You Are Single

Married couples have the benefit of their spouse as their default agent. However, single people must name a trusted family member or friend as their agent. What if they were incapacitated? Who would handle their financial affairs or medical decisions? Additionally, unmarried couples can only access financial or medical information on their partner with a power of attorney document.

Considering a Power of Attorney?

You control what authority you grant and who can serve as your agent. It is important to name backup or successor agents in your power of attorney if your agent is unable or unwilling to serve.

It’s easy to create a cost-effective power of attorney using FindLaw’s Estate Planning Forms. However, you may want to seek legal advice from an elder law or estate planning attorney if you have specific concerns regarding children with special needs or elderly parents with cognitive impairment.