Power of Attorney Explained

A power of attorney is a legal document that gives a person the authority to act on another's behalf.
May 12, 2022

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What is a power of attorney?

A power of attorney is a legal document that gives a person the authority to act on another's behalf

American Bar Association. Power of Attorney. Accessed May 4, 2022.
. Because life events can spur the need for any person older than 18 to rely on a power of attorney, all adults should consider setting one up.

Why does power of attorney matter?

Power of attorney can offer convenience and ensure your wishes are fulfilled when you’re unable to act on your own behalf.

If you don't have a power of attorney and become incapable of managing your personal or business affairs, a court could appoint someone to act for you. Court intervention could turn a private matter into a public proceeding, and there's no guarantee that a court-selected guardian would act as you wish.

What does power of attorney authorize?

Power of attorney authorizations are determined by your needs and wishes. The legal authorization can be general and sweeping, or it can be specific and limited. When granting power of attorney, you will want to consider the scope of your agent’s authority, its duration and when it should take effect.

Limited power of attorney

While a general power of attorney gives broad authority to your agent, a limited (or special) power of attorney allows your agent to perform only the activities you outline. For example, you could authorize someone to execute documents in your name for the sale of your home if travel prevents you from being at the real estate closing. Similarly, you could authorize someone to make medical decisions for you but not financial ones.

Durable power of attorney

If you have power of attorney in place as part of an estate plan, you likely want your agent to be able to continue acting on your behalf if you become temporarily or permanently incapable of managing your affairs. In that case, you will need to grant a durable power of attorney. Alternatively, a nondurable power of attorney is revoked if you become incapacitated.

Springing power of attorney

Power of attorney can be effective immediately or after a specified event. The second option is known as a springing power of attorney. This approach could ensure you have an agent authorized to act on your behalf if you become incapacitated.

Financial powers of attorney

In general, power of attorney is intended to give an agent authority to handle your financial affairs

American Bar Association. Pick the Right Power of Attorney Instrument. Accessed May 4, 2022.
. These can include everyday tasks, such as banking transactions, to more complex moves, like transferring property into a trust.

The person you grant power of attorney is a fiduciary, meaning they have a duty to make decisions that are in your best interest.

Legal agents can be authorized to handle a wide range of financial matters, including:

  • Distribution of assets to cover daily expenses.

  • Real and personal property transactions.

  • Stock, bond or other securities trades.

  • Banking duties.

  • Business operations.

  • Insurance and annuity transactions.

  • Estate, trust and other beneficiary needs.

  • Legal claims and other litigation.

  • Retirement benefits payments.

  • Charitable contributions.

  • Handling of government benefits, including Social Security, Medicare or unemployment compensation.

The extent of your agent's financial authority depends on the directives you set forth in advance.

Medical powers of attorney

A medical power of attorney, sometimes called an advance directive, gives your agent the authority to make all health care decisions for you in accordance with your wishes, including religious and moral beliefs, when you're unable to do so.

Health care, for power of attorney purposes, generally covers any medical treatment or procedure to diagnose and treat your condition. Your doctor and medical facility must comply with the decisions made by your power of attorney representative.

It's a good idea to discuss with your doctor the range of medical decisions that may be made on your behalf. Then, make sure the person to whom you grant medical power of attorney understands these and the decisions you want to be made in connection with each

American Bar Association Commission on Law and Aging. Giving Someone a Power of Attorney For Your Health Care. Accessed May 4, 2022.
.

Selecting an agent for power of attorney

Aside from being a legal adult — 18 years, in most states — and of sound mind, there are no special qualifications for a person to be granted a power of attorney.

You can give one person power of attorney for all your needs, or you can split the responsibilities among different people. They can be family members or longtime friends. If you’re married, most states recognize your spouse as a medical decision-maker if you become incapacitated and don’t have a medical power of attorney in place.

The key in all cases is that you know and trust the person or people you appoint.

You also should select successor agents for each power of attorney in case the primary person you name is unavailable or unable to act when needed.

Ending power of attorney

You can revoke or change a power of attorney designation whenever you wish. A nondurable power of attorney ends in the event you become incapacitated. Power of attorney also ends if a court invalidates it or your agent is no longer able to serve. In some states, if a spouse has power of attorney, that authority ends when the couple divorces.

Ultimately, since a durable power of attorney allows your agent to act in your place, the designation ends with your death. Responsibilities related to your will and the distribution of your property rest with the executor of your estate.

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