A power of attorney (POA) is a legal document that allows you to designate someone to manage your personal or financial affairs on your behalf.
Most people think “lawyer” when they hear “attorney,” but the term refers to anyone who’s legally appointed to act on your behalf. In the case of a power of attorney, you don’t appoint someone to represent you in legal proceedings, but rather to manage tasks you would normally do on your own, like signing a contract or opening a bank account.
In this POA guide, we answer commonly-asked questions so you can make the best decisions for you or your loved ones.
What Is a Power of Attorney?
A power of attorney (POA) is a flexible legal instrument that gives someone (the “agent” or “attorney-in-fact”) the power to represent another person (the “principal”) in their affairs to the extent the principal allows.
Not all powers of attorney function the same way. In the POA document, the principal can state the number of agents (and substitute “successor agents”), the extent of the agent’s powers, how powers are shared between agents, when the powers go into effect, and when they expire.
This allows the principal to customize the document to their needs so the agent doesn’t have too much power where it’s not needed.
What Are the Types of Power of Attorney?
The most common types of power of attorney are:
- General (financial) power of attorney
- Durable power of attorney
- Medical (or health care) power of attorney
- Limited (special) power of attorney
- Springing power of attorney
Let’s take a closer look at the types of POAs.
What Is a General (Financial) Power of Attorney?
A general power of attorney is used for decisions and actions relating to finances, for example, buying and selling stocks. As with all powers of attorney, the document should state when the agent’s powers begin and end, and whether they are broad (any decision related to the principal’s finances) or specific (only for certain situations).
A general/financial power of attorney can be either durable or non-durable.
What Is a Durable Power of Attorney?
A durable power of attorney takes effect at the date specified in the document and continues to be effective even if the principal is incapacitated and can no longer communicate their wishes.
Some states require a power of attorney to explicitly state that it’s durable, while others assume a power of attorney is durable unless otherwise specified.
Irrespective of your state law, we recommend that you always explicitly state whether the document survives the principal’s incapacitation.
What Is a Medical (Health Care) Power of Attorney?
A medical power of attorney is a POA that gives a trusted family member or friend the power to make healthcare-related decisions on behalf of the principal. These powers typically kick in when the principal becomes unable to communicate their medical preferences.
What Is a Limited (Special) Power of Attorney?
A limited power of attorney allows the principal to grant a specific power to an agent, like selling property or paying taxes. With a limited POA, the agent won’t have access to the principal’s general finances or affairs, and the transferred powers expire after the completion of the stated task or a specific time period mentioned in the document.
What Is a Springing Power of Attorney?
A springing (or conditional) power of attorney takes effect during specified circumstances, usually if the principal becomes incapacitated and can no longer communicate their wishes. This type of POA is useful for people who may need assistance in the future, but still want to manage their own general finances for the time being.
Medical POAs are a typical example of this type of POA.
Who Needs a Power of Attorney?
Everyone who may require assistance managing their financial and legal affairs needs a power of attorney. This could mean in a specific scenario or planning ahead for the possibility of incapacitation.
Here are some common situations that warrant a power of attorney:
- You need assistance selling a property while living abroad
- You want to choose the right person to manage your affairs in an emergency situation (e.g., a sudden serious illness), rather than leaving it to chance or to the courts
- You are active military and want to empower your parents, spouse, or kids with a POA while you’re deployed
- You travel frequently and find it convenient to give a trusted person the ability to sign for you in business or financial matters
What Are the Limitations on an Agent’s power?
No matter what type of power of attorney you use, the following limitations always apply to the agent’s powers:
- An agent can’t break their fiduciary duty to act in the principal’s best interest
- An agent can’t use a power of attorney after the principal’s death
- An agent can’t modify a principal’s will or trust documents
- An agent may not transfer powers to another person of their choosing
In addition to these legal limitations, it’s important to choose a trustworthy agent and specify in sufficient detail the terms of the agent’s power in the POA document.
How Do You Revoke a Power of Attorney?
A principal can revoke the powers previously assigned to their agent by filing a revocation of power of attorney.
Because you must be of sound mind to create, alter, or revoke a legal document, the principal loses the ability to revoke a power of attorney after they’re declared incapacitated. If you suspect negligence or abuse of POA, there are a few steps you can take to override a power of attorney.
Where Do I Get Power of Attorney Forms?
Depending on your resources, you can hire a lawyer to draft a power of attorney for you, or you can do it yourself. The law does not specify a rigid format for a POA document, but many state government websites and bar associations offer guidelines, samples, and templates. The most important aspect of creating your own power of attorney is ensuring it complies with state legislation, in terms of:
- witness requirements
- phrasing related to durable powers