What You Should Know About Powers of Attorney

What You Should Know About Powers of Attorney

A power of attorney (POA), is a legal document that grants one person (the agent or the attorney-in-fact) the power to act on behalf of another person (the principal).

The authority granted can be very broad or limited depending on how the document is worded. An example of this would be a Limited Power of Attorney for one person to sign for another the closing documents for a real estate purchase.

A power of attorney can end for several reasons:

  • Revoked by the principal
  • Incapacity of the principal
  • Invalidated by a court
  • Divorce when one spouse is principal and the other is the agent

There are Durable POAs that remain in force if the principal becomes incapacitated, as they set out the powers of the agent to care for the principal or manage their affairs. There is also a “Springing POA” that goes into effect only if and when the principal becomes incapacitated. A medical or healthcare POA is of this type.

  • General Power of Attorney – the agent is authorized to act on behalf of the principal in any and all matters as allowed by state law. The agent may handle bank and retirement accounts, sign checks, buy and sell assets, and file taxes.
  • Limited Power of Attorney – the document sets out specific powers and actions that the agent can take on behalf of the principal. The sale of real estate or allowing the management of specific retirement accounts.

The Durable Power of Attorney (DPOA)

The DPOA, Durable Power of Attorney, spells out specific actions the agent can take on behalf of the principal after they become incapacitated, mentally or physically. While the DPOA can authorize the agent to make financial and healthcare decisions for the principal, it isn’t up to the document to authorize the agent to remove the principal from life support.

  • Healthcare Power of Attorney – legally binds the agent to make healthcare decisions for the principal when they’re incapacitated. These may be decisions about facilities or even limited decisions related to treatments.
  • Financial Power of Attorney – this document allows the agent to make business and financial decisions for the principal, sign checks, file tax returns, and manage financial accounts.

Concerning these two types of DPOA, you should consider two different DPOAs, one for healthcare and the other for financial affairs. This will keep your medical information separate from financial matters for privacy reasons.

Setting Up a Power of Attorney

As with many legal documents, the states have their own laws regulating their terms and formats. There are online resources that allow you to download templates for POAs that are state-specific. However, in matters this important, consulting with an estate attorney is advisable, at least to get them to approve or edit the documents.

Most states require that the principal’s signature be notarized, and some require that the witness signatures be notarized as well. Be aware of a couple of generally accepted considerations for a POA:

  • All states accept some form of durable power of attorney.
  • State laws and processes vary, and there is no standard form.

While POAs can accomplish a lot, there are a few powers that can’t be delegated:

  • It can’t change or revoke a will.
  • The agent can’t vote for the principal, though they can request a ballot.
  • In most states, the POA can’t contract a marriage.

While state laws govern some aspects of powers of attorney, some rules apply everywhere:

  • While oral POAs may be allowed in some areas, as with all important legal documents, they should be in writing.
  • The parties involved, the principal and the agent(s), must be clearly identified.
  • Use the proper document format for the purpose. Whether durable, limited, general, etc., use the proper document for the task.
  • Identify the powers carefully and clearly. Ambiguous statements can create problems, and you should carefully describe every power delegated.
  • If the intent is for a durable POA, clearly state that fact or it may be revoked on incapacity.
  • Notarize, record, and file it. Conform to state and other laws, notarize the document properly, record it at the courthouse, even if not required, and if required file it with the appropriate court.


Trust in Your Agent

The power of attorney confers a lot of authority to someone over your life and the lives of others that you or your finances influence. Choose your agent wisely, and they should be completely on board with all that the POA entails.


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