Table of Contents
- The Definition: What is a Power of Attorney (POA)?
- Power of Attorney Sample and Explanations
- How to Give or Get Power of Attorney
- How to Protect This Document from “Powerlessness”
- How to Terminate, Void, and Revoke a Power of Attorney Form
- Download a Free State-Specific Template
- FAQ (Frequently Asked Questions)
1. The Definition: What is a Power of Attorney?
This written document officially recognizes a legally binding relationship between two parties — a Principal and an Agent. The Agent is given the power to manage the personal, business, or legal affairs of the Principal. Further, the Agent has a fiduciary duty to act in the Principal’s best financial interest and in accordance with his or her wishes.
Powers of Attorney are commonly used when someone wants the peace of mind that their financial or health decisions will be made by someone they trust.
You may need this form if you are:
- Over the age of 18 years old
- Military personnel being deployed overseas
- Traveling abroad for an extended period of time
- Diagnosed with a chronic condition or life threatening illness
- Growing wiser and older but concerned about your current health
- Married and want your spouse to have legal authority over property you own
- Engaged in a high risk profession (i.e. emergency firefighter or member of police force)
What should be included?
A simple POA will identify the following basic elements:
- Agent(s): a responsible and trustworthy person acting on your behalf
- Principal: person assisted with personal, business, or legal matters
- Grant of Authority: general or specific authority to take certain actions
- Effective Date: when the the form effectively begins, usually immediately
- Signatures: the Principal and a Notary must sign the document
As a reference, a Power of Attorney, Principal, and Agent have other names:
Power of Attorney
|Letter of Attorney||Donor||Health care proxy|
|Surrogate decision maker|
What happens if you don’t create this form?
A Power of Attorney can help make your life much easier, by allowing someone you trust to take certain actions on your behalf. Without this document, you might not be able to travel out of town, make certain investments, or handle business or personal affairs.
In addition, if you ever become incapacitated, without this document, even if you have a spouse, the court may need to step in and appoint a guardian or conservator for you. The process of appointing a guardian is costly and requires the guardian to formally report your situation to the court each year. CNN Money estimates that the process of obtaining a court appointed guardian exceeds $1,000. If this is the situation you find yourself in now, please read our guide about getting guardianship over your elderly parent here.
Instead, a POA allows you to take back control and proactively choose who YOU want to represent your best interests. By taking the time to create this important document, you can prevent both individual and familial suffering.
Preventable Suffering: Individual and Familial
|1. EXCESS COSTS||1. EXPENSIVE LAWYER FEES|
|Guardianship hearing in court||Advocate for a guardian|
|Family members disagree||Dispute the court decision|
|2. EMBARRASSMENT||2. PUBLIC EMBARRASSMENT|
|Declared legally "incompetent"||Privacy of sensitive family situation goes before court|
|Loss of personal dignity||3. LOSS OF CONTROL|
|3. LOSS OF CONTROL||Unable to administer your family member’s wishes|
|Court appoints a guardian||4. MENTAL ANGUISH|
|Your wishes are not respected||Family fights over who should be the guardian|
|Your finances and legal actions are in the hands of someone you did not choose|
|4. LOSS OF TIME|
|Unable to respond quickly to pressing matters until court appoints a guardianship|
The AARP, Inc., formerly the American Association of Retired Persons, also provides a useful FAQ about the importance of having this document.
2. Power of Attorney Sample and Explanations
This document can be used to handle a variety of situations, and can be customized based on your need. You can grant a POA related to different areas of your life, with varying degrees of power for the agent, and for any timeframe that you desire.
PDF Sample Power of Attorney
The power of attorney sample below gives “Agent” Elizabeth Scooner the authority to make financial decisions in the event that “Principal” Jack Scooner is incapacitated. Elizabeth has the authority to handle issues dealing with Jack’s property, stocks, insurance, and business. Keep in mind that this sample is customized to be in accordance with Maryland law.Power-of-attorney-sample
Financial vs. Medical POAs – What’s the difference?
Non-medical matters such as those related to business or your personal affairs can be covered in a Financial POA. Medical decisions such as those related to your health care can be covered by a Medical POA. Most individuals have separate documents for general matters and health care issues.
A Financial Power of Attorney allows you to name your business or personal agent, someone who will make decisions or take actions on your behalf if you cannot. Your business or personal agent will make sure that your wishes are communicated to and taken into account by other parties. If you are out of the country when you are closing a business deal, paying a professional to manage your assets, keeping a personal assistant to do all of your banking and errands, or allowing your child to travel with a family friend, you can grant an agent power of attorney to sign documents on your behalf and/or make decisions for you.
A Medical Power of Attorney allows you to name your health agent, someone who will make health decisions for you if you cannot. Your health care agent will also ensure that your health care providers give you the care you wish to receive. You can also require that your health care agent communicate in any manner with you about any specific proposed health care. For example, you may still be able to communicate by blinking your eyes.
Financial vs. Health Care POA
POA for Health Care
|1. ASSET MANAGEMENT||1. MENTAL HEALTH TREATMENT|
|Access your bank accounts||Admit or not admit you into an institution for mental diseases or state treatment facility|
|Sign checks for you||Consent or not consent to experimental mental health research or psychosurgery|
|Pay your bills||2. NURSING HOMES|
|Manage your investments||Admit you into a nursing home|
|Make key financial decisions||Admit you into a community-based residential facility|
|Sign your income tax return||3. FEEDING TUBE|
|Apply for retirement or social security benefits||Withhold or withdraw a feeding tube|
|Sign contracts and legal docs||4. PREGNANT WOMEN|
|Sell your stocks||Health care agent may or may not make healthcare decisions for you if they know you are pregnant|
|Invest your assets||5. MEDICAL INORMATION|
|Manage your real estate||Request, receive, and review all medical records|
|Conduct business affairs||Grant medical releases|
|2. ESTATE PLANNING||Consent to disclosure of info|
|Exercise options under retirement plans||6. MEDICAL TREATMENT|
|Make gifts to your favorite charities or people||Initiate or withhold a procedure|
|Purchase life insurance or pay for policy premiums||Start or stop a medical service|
|Create funds or trusts||Modify medical care|
|3. CUSTODY MANAGEMENT AND CONCERNS||Employ and discharge healthcare personnel|
|Nominate a guardian or conservator||7. ANATOMICAL GIFTS|
|Provide for recreation, travel, religious needs, or companionship||Arrange or prohibit organ donations or donate your body for anatomical study if needed|
|Care and handle pets|
|Arrange funeral and burial|
|Signing waivers or consent forms for children traveling without a parent|
Special (Limited) vs. General POAs – What’s the difference?
A Power of Attorney can be created for different purposes with varying levels of authority granted to the Agent. The Agent can be tasked with acting as your agent for one specific action or in general for all affairs pertaining a certain aspect of your life.
A Special or Limited POA gives an Agent the power to act on your behalf, but only specific powers. You can create several Special POAs, with different agents granted different powers.
Here is a list of some of the specific powers you can grant to your Agent:
- Sign checks
- Withdraw money
- Make a gift
- Create, amend, revoke, or terminate an inter vivos trust
- Create or change rights of survivorship
- Create or change a beneficiary designation
- Authorize another person to exercise authority granted by the power of attorney
- Waive the principal’s right to be a beneficiary of a joint and survivor annuity, including a survivor benefit under a retirement plan
- Exercise fiduciary powers that the principal has authority to delegate
A General POA gives an Agent broad power to act on your behalf, taking any action or making any decision that would normally fall to you.
Here is a list of some of the general powers you can grant to your Agent:
- Sell real property or tangible personal property
- Buy and sell stocks and bonds
- Handle all banking
- Operate a business
- Buy insurance and annuities
- Manage estates, trusts, and other beneficiary interests
- Handle all claims and litigation
- Manage all personal and family affairs
- Prepare and file taxes
The powers granted under a General Power of Attorney may be limited by state statutes.
Special vs. General Care POA
|Limited Purpose||Broad Purpose
Non-Durable vs. Durable vs. Springing (Conditional) POAs – What’s the difference?
Depending on your circumstances, you may want your Agent to begin acting on your behalf immediately using a Non-Durable or Durable Power of Attorney, or at a later date using a Springing (aka “Contingent”) Power of Attorney. These variations answer two questions:
- When should it take effect?
- When should it end?
All Powers of Attorney end at the time of death. At that point, a Last Will and Testament hopefully takes over.
A Non-Durable Power of Attorney is usually limited to specific situations and becomes effective immediately upon signing. It automatically ends when the specific situation is no longer in effect or when you die or become incapacitated. You can also rescind rescind it at any time.
A Durable Power of Attorney also becomes effective immediately upon signing, however it allows the Agent to continue acting on behalf of the Principal even when he or she becomes incapacitated. This type ends automatically when you die, but you can also rescind it, as long you are not incapacitated.
A Springing or Conditional POA only goes into effect if a certain event or condition occurs. It can end at a specific time, when you become incapacitated or when you die.
Non-Durable vs. Durable vs. Springing Comparison
|Goes into effect IMMEDIATELY||Goes into effect IMMEDIATELY||Goes into effect at a LATER time (i.e. when you become incapacitated)|
|Incapacity might need to be proven||Incapacity does not need to be proven||Agent must prove event or incapacity (i.e. via doctor's letters)|
|Ends when Principal revokes it or if Principal dies or becomes incapacitated||Stays in effect even when you are temporarily or permanently unable to make decisions||Termination can be non-durable or durable|
|Ends when Principal dies|
3. How to Give or Get Power of Attorney
To give or get a Financial or Medical Power of Attorney, prepare a power of attorney with the following details:
- Principal’s name
- Agent’s name
- Durable or non-durable
- Effective date or springing condition
- The special or general powers granted
Have you recently been granted Power of Attorney of an elderly relative? The extra responsibility may add tension between family members causing issues at home. Here are some tips on preventing family feuds.
4. How to Protect This Document from “Powerlessness”
If you take the time to create a Power of Attorney, you want to make sure that it will be effective. There are situations where your document may be rejected, or “powerless” if you aren’t careful. Here are a few steps you can take to help ensure your POA won’t be “powerless”:
- Use a state-specific form – Each state has different laws and statutes governing this document. Our state-specific forms are customized for each particular state.
- Make sure you have all signatures and authorizations – Some banks and financial institutions have specific requirements as to who needs to sign the document.
- Keep it up-to-date – If your state has rewritten its laws or your document is more than several years, it may be considered ‘stale’ and may need to be updated.
- Get it witnessed and notarized – Sign your document in front of witnesses, stating that you were competent and signed the document voluntarily. Also make sure to get your document authenticated by a notary public.
Read our post on how to prepare for these “powerless” scenarios, and how to prevent them from happening.
5. How to Terminate, Void, and Revoke a Power of Attorney
If you decide you no longer want a Power of Attorney, you can take the following active measures to terminate it, provided you are still legally competent:
- prepare a Revocation of Power of Attorney
- destroy the document
- follow any termination procedures detailed in the document
The document also automatically terminates when:
- the Principal dies
- the Principal becomes incapacitated (if non-durable)
- the Agent dies or is declared legally incompetent and there is no successor named
If you do decide to void a Power of Attorney, you should notify any banks, businesses, or other institutions that might be affected.
6. Download a Free State-Specific Template
POA documents are state dependent. We have gathered all 50 states’ Financial POA forms, plus the District of Columbia, for you to download at your convenience for free.
This document will allow you to appoint an Agent or Attorney-in-Fact to make non-medical decisions for you. If you would like a free Medical POA instead, please visit our page here.
If you are not sure how to customize your templates, we recommend using our builder, as it will guide you through the process and ask you the appropriate questions.
Download Financial POA (Durable) Templates by State
Simply click the state that you live in to download the document.
6. FAQ (Frequently Asked Questions)
Your Agent or Attorney-In-Fact (AIF) should act in your best interests and handle your personal or financial affairs.
An Agent should have the following attributes:
- Physically healthy
- Lives near you
- Sound of mind
- Financially secure
- Experienced in financial matters
- Understand your concerns, priorities, philosophies, and life values
- Strong advocate for you if professionals or institutions are unresponsive
- Willing to take on the responsibility and faithfully carry out your wishes
- Capable of handling conflicting opinions from family and professionals
Further, an Agent does not necessarily have to be an individual or even one person. In fact, an Agent can be an institution like a bank or you could have Co-Agents like your two children. If you are appointing co-agents, you should specify whether they can act independently or must act together. Be sure to clarify how disputes should be resolved if the Co-Agents disagree.
2. What else can be included?
You can nominate a guardian and ask the court to appoint a guardian of your choosing if it becomes necessary in the future.
Most states will recognize any POA that is validly signed in another state. So if you make a valid document while living in one state and then move to another state, your document will still be valid in your new state of residence. However, it may be a good opportunity to update your document and prevent it from being “stale”.