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What is a power of attorney?

A power of attorney gives another person legal authority to act on your behalf and can be a key piece of an estate plan. Here's what you need to know.

evident Editorial Team
published
August 22, 2021
Mother and daughter sitting on beach at sunset

A power of attorney gives another person the legal authority to act on your behalf. When you (the principal) sign a POA, you give another person (known as the agent or “attorney-in-fact”) the authority to act on things like your property, finances, or medical decisions. 

There are several kinds of POAs that give the agent various levels of control over your affairs. Power of attorney is an important part of estate planning, as almost everyone will need a POA at some point.

Key Takeaways

What is POA used for?

You might decide to set up a power of attorney for a variety of reasons. Many people establish a power of attorney so they can pass on the management of their affairs to someone else when they become elderly and no longer have the physical or mental capacity to manage them on their own. 

If you become incapacitated without a POA, the court will appoint a guardian or conservator, and your family will have no control over this appointment. Principals must establish powers of attorney for themselves, meaning your family cannot establish a POA for you after you become incapacitated.

People might also set up POAs for convenience, such as with a Special POA which allows someone to represent you in the business field and make financial dealings in your name without you being present.

It’s important to note that wills and powers of attorney are not the same things. While both are related to estate planning, your will describes the distribution of property after you die. By contrast, a POA only governs decisions made while you’re still alive since POAs expire upon your death.

How to get a power of attorney

Anyone can establish a power of attorney – you can even do so on your own by downloading the necessary forms online. However, powers of attorney are created under state laws, and therefore the forms differ by state. Since there is no single standard form, make sure your forms fulfill your state’s requirements. Working with an attorney to make sure your forms are correct could prevent mistakes later down the road. 

Your attorney will also help make sure you execute the documents according to your state regulations. For instance, some states require the documents to be notarized and others require several witnesses to sign the documents to verify your mental competency. 

The language of your POA is also critical because it dictates the amount of legal control another individual will have over you. In addition to ensuring your documents are in order, a lawyer will help ensure that the agent’s responsibilities are clearly outlined.

The different types of powers of attorney

An agent’s power depends on the type of POA the principal chooses and the details they choose to include within their POA. The main substantive kinds of POAs are:

Type Explanation
General Power of Attorney The agent acts on behalf of the principal on all matters. 
This means the agent can manage the principal’s bank accounts, sell their assets, manage their government benefits like Social Security, and make decisions about their healthcare.
Special Power of Attorney The agent’s power is restricted to specific matters.
The principal might give an agent the power to manage their retirement account under this kind of POA, meaning the agent’s authority does not extend beyond that particular account. This kind of POA might be chosen if a principal cannot handle certain business because of a health issue or other circumstances. Special POAs often include a start and end date. 
Healthcare Power of Attorney Your agent has the power to make medical decisions for you.
This type of POA can be used during long-term health crises or temporarily (like when you go under anesthesia during surgery). Note that some states prohibit your physician and other medical providers from being your healthcare POA agent.

There are also different durational types of POA. That is, any of the above substantive types of POA can take the following forms:

Form Explanation
Durable Power of Attorney Your power of attorney agreement will remain in effect even when you become physically or mentally incapacitated. 
Ordinarily, POAs become void once the principal becomes mentally incapacitated. Many states assume a POA is durable unless stated otherwise
Springing Power of Attorney This is a type of Durable POA that only goes into effect when you become incapacitated. 
Your power of attorney documents must provide a detailed description of the type of event or level of incapacitation necessary to put your POA into effect. In this type of POA, your agreement can remain inactive until a health event activates it.
Temporary Power of Attorney This type of power of attorney has a start and end date. 
A Temporary POA lasts for a limited period of time and usually allows the agent to oversee a limited part of your affairs. For example, you could authorize an agent to pay bills for you while you’re out of the country under a Temporary POA. 
Standard Power of Attorney A Standard POA lasts until you become incapacitated. 
This is the typical form that power of attorney agreements come in. Your POA remains in place until you lose the ability to make decisions for yourself, at which point it expires. 

 

Here's an example of the difference in the duration of a regular power of attorney, Durable POA, and Springing POA if an injury that leads to incapacitation occurs:

Timeline of different POAs, with durable lasting both before and after an injury which causes incapacitation


What are the limits of power of attorney?

Limits of a power of attorney depend on the type of POA in effect. However, there are some things the agent never has authority over. 

As previously mentioned, if you give someone the authority to manage your retirement account under a Special POA, that’s where their authority ends. They won’t have control over anything other than that account. This applies to Healthcare POAs and other agreements that are limited in scope.

Meanwhile, even if you have a General POA in which an agent has authority over all matters, they will still be unable to alter your will, make decisions for you after your death, transfer the power of attorney to another individual, and vote on your behalf in a public election.

What is the process for enacting a POA?

There are four main steps to enacting a POA:

The four step process to enacting a power of attorney

Things to consider when naming an agent

There are only two requirements to be an agent:

  1. You must be of sound mind, and 
  2. At least 18 years of age. 

Family members are commonly selected as agents. Professionals such as your lawyer or accountant can also be your agent, though they may charge fees. 

That being said, it’s critical that you choose someone who you trust to carry out your wishes. The medical decisions your agent makes could be a matter of life and death, and the financial decisions they make could leave you bankrupt if mismanaged. Agents are only held legally accountable for intentional misconduct – they will not be held responsible for doing something wrong unknowingly. This makes it even more crucial that you pick an agent you trust. 

Naming a spouse who’s around the same age as you sometimes defeats the purpose, as your spouse will likely also need a POA to manage their end-of-life affairs at around the same time. 

Trustworthy children are often the best choice for POA agents. While you can name multiple agents and have your children share the responsibility, this can sometimes make things difficult if they’re unable to make decisions at the same time or agree on every choice. 

Additionally, risk protection measures can be written into your agreement to prevent mismanagement. You can require that your agent reports all actions to an outside party (like a family attorney or accountant), or you can name two agents and require they agree on major transactions (like the sale of property) before they are made. Lawyers can draft these kinds of safeguards into your agreement in accordance with your state’s laws.

Other frequently asked questions

How to sign as power of attorney? 

When acting as an agent, it’s essential to sign documents in a way that makes it clear you are signing the document on behalf of the principal under the authority of their POA. Sometimes bank forms and legal documents will require a particular signature format. 

For example, if Jane Smith has power of attorney for John Smith, she could sign two ways:

Jane Smith can either sign John's name "under power of attorney" or her own name "as agent for John Smith"

What if I move out of state?

It’s unlikely that you’ll need to sign an entirely new POA if you move states, as powers of attorney are generally valid across state lines. That being said, it might be worthwhile to update your POA if you move in order to ensure your documents are in accordance with the nuances of your new state’s laws. 

Moving out of state may also mean your overall circumstances have changed. If so, it’s important those changes are reflected in all of your estate planning documents.

Can a power of attorney expire?

Powers of attorney only expire when the principal dies, unless the principal includes an expiration date for the POA ahead of time. Expiration dates are typically included for temporary POAs. They can also be structured as a condition that the POA will expire once a particular event occurs. For example, a Healthcare POA may contain a condition that the POA will expire if the principal regains the ability to make their own medical decisions. 

If your POA doesn’t include an expiration date, it’s a good idea to revisit your POA every three to five years (or every time you experience a life-changing event) to ensure your documents accurately reflect your situation. 

Additionally, an agent can resign at any time by giving the principal written notice. Many POAs list a successor agent, and a lawyer would probably recommend naming one so that your POA doesn’t expire if the agent resigns. But, if the agent resigns and you have not listed a successor agent, the POA must end because there is no one else authorized to carry it out.

Who can override a power of attorney?

Agents are legally required to act in the best interest of the principal. If family members or other individuals feel that the agent is acting improperly (including behavior that’s grossly negligent or abusive toward the principal), they can file a court petition challenging the agent. 

If the court agrees that the agent is not acting in the principal’s best interest, it can revoke the POA and appoint a new guardian in the agent’s place. The only person who can override a power of attorney other than the judge is the principal, so long as they’re mentally competent.

The final word on POAs

All in all, establishing a power of attorney is critical to ensure your affairs are taken care of when you’re no longer able to take care of them yourself.

It is possible to execute a power of attorney without a lawyer. But with so much on the line and the laws that vary by state, it is often worthwhile to speak with a lawyer. Your attorney can help determine which powers should be included in your POA, who your agent should be, and help ensure your documents meet the requirements for your state.