What Is Power of Attorney?
A power of attorney (POA) is a legal document that gives someone else the legal power to act on your behalf. It can be either a temporary or permanent provision and cover either a broad or narrow range of decisions.
People usually give POA to another person either for convenience or to prepare for situations where they can’t act themselves. In the context of estate planning, most people use power of attorney to designate someone who can make decisions if a future disability or illness keeps them from being able to act themselves.
The person you choose to act on your behalf is known as your agent or attorney-in-fact. You can choose whether to give your agent general power or limit their power to specific activities such as selling your home.
Many people choose their spouse, child, or another family member to be their agent in the event of a serious health decline. You can choose more than one person to be your agent. However, if you do, you should indicate what should happen if the co-agents can’t agree or aren’t all available.
When It Makes Sense to Use Power of Attorney
If you become incapacitated for any reason in the future, you will want someone you trust to take care of important matters for you. As part of your estate planning process, you may want to authorize an agent to do some or all of the following in the event of a serious illness, injury, or disability:
- Apply for public benefits like Medicare, Medicaid, or Social Security for you.
- Make healthcare decisions.
- Give away your money or property, such as if you want to give annual gifts to your children or grandchildren.
- Cash your checks.
- Manage your business.
- Collect your debts.
- Make or maintain investment decisions.
- Buy or sell things on your behalf, such as your home and car.
- Change your community property agreement or transfer property to your spouse so that you can be eligible for Medicaid if needed.
- Manage other financial matters.
- Sue on your behalf.
You cannot give an agent the power to make or alter a will on your behalf. You also cannot authorize someone to vote in public elections for you.
Creating a document that specifies a POA gives you some level of control over what will happen if you lose the ability to act for yourself. It lets you choose who will make decisions and defines the limits of that person’s authority. If you don’t have this type of document set up, a court could appoint a guardian or conservator for you without taking your preferences into account.
Power of attorney does not have to take effect right away. A “Springing POA” only takes effect under specific conditions, such as a formal determination that you are mentally or physically unable to act for yourself. It also doesn’t have to be permanent — as long as you are physically and mentally capable, you can revoke the POA.
How to Protect Against POA Abuse
Giving power of attorney comes with some inherent risks. Your agent could make decisions you would disagree with, spend your money on themself, pressure you for authority you don’t want to give them, or try to do things you didn’t authorize them to do.
You should only give power of attorney to someone you trust. If you choose an agent and then later decide they aren’t the best choice, you can revoke, cancel, or change your POA down the road as long as you aren’t incapacitated.
The best way to protect yourself from abuse and unwise agent decisions is to work with a lawyer. You can also tell other people about your POA so they can look out for you. We usually recommend telling some combination of family members, friends, and financial advisors you trust about your power of attorney documents.
All states accept the possibility of a power of attorney, but different states have different rules and requirements. If you are planning to move to another state, you may want to talk to a lawyer about how that state’s rules will affect your estate planning provisions.
Need Help With Your Estate Planning?
The Anderson Hunter Law Firm can help you make sensible POA plans that protect your interests. Schedule a consultation with one of our experienced lawyers for help with your estate planning.