Power of Attorney

A Power of Attorney (POA) is a legal document that authorizes someone you appoint to act on your behalf. That appointee, known as your agent or “attorney-in-fact,” has a fiduciary duty to act in your best interest.  

There are two main types of POAs. A financial POA allows your agent to handle your financial and legal affairs, such as manage investment accounts, file taxes, sign checks, and conduct real estate transactions. A health care POA, which is sometimes referred to as a ‘health care proxy,” gives your agent the authority to make medical decisions on your behalf. You may choose to have the same person serve as both your financial and medical POA or you may decide to have a different person for each role, depending on your situation.

Both are helpful tools in planning for future scenarios, particularly for older adults who may be concerned about potential cognitive challenges like dementia or other health-related issues. However, anyone age 18 and older may create a POA. 

The authority you provide may be limited to specific situations or more general in its application. It can be temporary or permanent, depending on how you set up the POA. All POAs end when you, as the grantor, dies. 

Four main POA categories:

• A limited POA allows your agent to handle a specific task or represent you during a specific period of time. For instance, this can be helpful if you’re out of town and need someone to handle a real estate transaction for you. 
• A general POA grants as much authority to your agent as you wish. However, your agent’s authority ends if you become incapacitated. 
• A durable POA grants whatever powers you wish but remains effective for as long as you live, even if you become incapacitated. 
• A springing POA also lasts until your death, but it does not become effective until an event you specify occurs, such as being deemed incapacitated. 

Choosing an Agent

It’s important to choose your agent carefully, as there are risks involved. With a POA, your agent may be able to access your financial accounts and spend your money with the potential to liquidate your accounts.

When choosing an agent, consider the following questions:

• Do you trust the person to always act in your best interest?
• Is the person in good mental and physical health?
• Does the person try to evaluate a situation before making a decision?
• Does the person communicate well?
• Will you be comfortable sharing your financial details with this person?
• Is this person truly the best choice?

Note that agents are only authorized to act as stipulated by the POA and what they can do is regulated by state law.  For instance, agents cannot mix your assets with theirs or let someone else manage your affairs without your consent or a court’s approval.  Agents who violate their fiduciary duty could be held liable under the law.

How to Get a POA

Contact an attorney to obtain a POA that meets your state’s requirements. Check your state’s bar association. 

Things to Consider

It’s always a good idea to review your POA and keep it up to date. 

You can always change your mind and cancel a POA. You can revoke it if your agent isn’t the right person for the role.