Having a power of attorney (POA) in place can be hugely helpful for both an individual and their close family and friends.
This system can offer peace of mind and ensure that important decisions can be made in accordance with your wishes in the event of illness or some sort of incapacity.
It’s a great way to delegate important legal tasks, the details of which we will go into in this article.
Key takeaways:
- A power of attorney allows somebody else to make decisions about your finance or healthcare on your behalf.
- This agent must act in your best interests and follow a strict set of rules laid out in the document.
- Your chosen agent should be trustworthy, reliable and willing.
- Safeguards do exist to stop an agent from “going rogue” and making decisions against your will.
- A robust POA template will help make the entire process easier for you.
What exactly is a power of attorney?
A power of attorney (POA) is a legal document that authorizes an individual or organization, known as the ‘agent’ or ‘attorney-in-fact’, to act on behalf of another individual, known as the ‘principal’.
This legal document allows the agent to carry out any legal, financial, or healthcare-related actions for you.
This can be beneficial in situations where you might be unable to make decisions independently due to an illness, an injury, or some other reason.
You can create a power of attorney whenever you want, as long as you are of sound mind and understand the implications of what you’re signing.
Rights under a power of attorney
While the agent is given the power to make decisions and act on your behalf, many rights and responsibilities come hand-in-hand with this authority.
So what does power of attorney mean in this way?
First off, the agent always has a duty to act in the best interest of you — the principal — and make decisions that are in harmony with your personal wishes and preferences.
The agent must also follow any instructions or limitations that are laid out in the power of attorney document – they can’t just go rogue.
The principal also has certain rights under a power of attorney.
For example, they can revoke the power of attorney whenever they please, as long as they are considered to be of sound mind and capable of making decisions.
Additionally, the principal has the right to request a detailed list of any actions taken by the agent under the power of attorney, which can help ensure transparency and accountability.
The agent can be held liable for any losses or damages that result from their actions.
This is especially the case if they choose to act outside of the scope of their authority or breach their duty to act in your best interest.
Limitations of a power of attorney
There are several potential limitations to consider before creating a power of attorney.
One limitation is that a power of attorney can be revoked at any time by the principal, as long as they are of sound mind and capable of making decisions.
This means that if the principal regains their ability to make sound decisions on their own, they can choose to revoke the power of attorney and take back control of their assets and affairs.
Another limitation is that a power of attorney can only grant authority to the agent within the scope of the document.
So, the agent cannot take actions or make decisions that are not specifically authorized in the power of attorney.
If a power of attorney only grants the agent authority to make healthcare decisions, they can’t make financial or legal decisions on behalf of the principal.
Some third parties also might not accept a power of attorney as valid or may demand additional documentation or verification before accepting the agent’s authority.
This can be especially true for financial institutions, which may have their own processes and policies for verifying the agent’s authority.
It’s also important to note that a power of attorney does not grant the agent the authority to make decisions after the principal’s death.
In order to make decisions on behalf of the principal’s estate, a separate document, such as a will or trust, might be needed.
There could also be legal limits on what kind of decisions can be delegated via a power of attorney.
For example, in some jurisdictions, when it comes to some decisions related to healthcare or end-of-life care, these might not be able to be delegated through a power of attorney and instead need specific legal documents.
A power of attorney does not absolve the agent of their legal and ethical responsibilities.
The agent has to always act in good faith, in other words, in the best interests of the principal and within the limits of the authority they have been granted regarding the power of attorney.
If the agent breaches their duty, they can be held liable for any resulting losses or damages.
Different types of powers of attorney
There are a few different types of powers of attorney. We’ll focus on two major ones here.
Financial power of attorney
A financial power of attorney grants the agent the authority to make financial decisions on behalf of the principal.
This can include managing bank accounts, paying bills, filing taxes, and even buying or selling property, as well as making investment decisions.
A financial power of attorney can be general, giving the agent broad authority over all financial matters or specific ones, limiting the agent’s authority to certain types of transactions or assets.
There are several types of POA, including:
- General power of attorney: This type gives the agent broad authority to act on behalf of the principal. Duties of this power of attorney can include managing financial and legal affairs.
- Limited power of attorney: This gives the agent specific authority to carry out certain actions on behalf of the principal, such as selling a property or signing a contract.
- Durable power of attorney: This type of power of attorney remains valid even if the principal becomes incapacitated.
- Springing power of attorney: This only goes into effect once a specific condition is met.
A healthcare power of attorney
A healthcare power of attorney is also known as a medical power of attorney.
It gives the agent the authority to make healthcare decisions on behalf of the principal if and when they are unable to make those decisions themselves.
This can include decisions surrounding things such as medical treatments, any surgeries, and even end-of-life care.
A healthcare power of attorney can also include instructions about the principal’s wishes for medical treatment and can be combined with a living will.
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Use this templateGeneral power of attorney vs. durable power of attorney
A general power of attorney grants the agent broad authority to act on behalf of the principal in several matters, such as managing finances, signing contracts, and making legal decisions.
However, a general power of attorney may be limited in scope and duration and can be revoked by the principal at any time.
A general power of attorney can be useful for situations where the principal is temporarily unable to handle their affairs.
A durable power of attorney, on the other hand, is designed to stay valid even if the principal becomes incapacitated or unable to make decisions on their own for whatever reason.
It allows the agent to continue acting on their behalf.
A durable power of attorney’s responsibilities can cover both financial and healthcare decisions and can be general or specific in scope.
The main advantage of a durable power of attorney is that it provides some security and protection for the principal if they become unable to make decisions for themselves.
Without a durable power of attorney, a court can end up needing to appoint a guardian or conservator to make decisions on the principal’s behalf.
A durable power of attorney can also provide peace of mind for the principal and their families since there is a designated agent to handle important matters if the need arises.
However, a durable power of attorney is a very powerful legal document that grants significant authority to the agent.
Carefully considering who to appoint as an agent and clearly defining the scope of their authority in the document is an absolute must.
You should also consult with a lawyer to ensure that the document accurately reflects your wishes and complies with any applicable laws.
So, to summarize, while a general power of attorney can be useful in certain situations, a durable power of attorney provides a higher level of protection and security for the principal in case of incapacity.
Each type of power of attorney has its own pros and cons. It’s a good idea to consult with a lawyer to decide which is most appropriate for your situation.
How to choose agents for your POA
Choosing an agent for your power of attorney is an important decision, and you shouldn’t make it lightly.
The agent you select will have the power to make important decisions on your behalf, so you must choose someone trustworthy and competent.
Here are a few factors to consider when selecting an agent for your POA:
Are they trustworthy?
The agent should be someone you trust completely.
They should be demonstrably honest, reliable, and have your best interests at heart.
Are they competent?
The agent should be able to manage your affairs competently.
They should have a good understanding of financial matters if they will be in charge of handling your finances or a good understanding of healthcare issues if they are going to be making healthcare decisions on your behalf.
Are they available?
Whichever agent you choose should be available to act on your behalf when the time comes.
It’s vital to select someone who isn’t likely to be unavailable for extended periods of time for whatever reason.
Are they willing?
Obviously, the agent should be willing to act as your power of attorney, so make sure that you discuss this decision with them before appointing them as your agent.
Are they a good communicator?
They should be able to communicate clearly and in a timely fashion with you, your family, and anyone else involved in your affairs.
They should be able to keep you in the loop about any important decisions and be able to explain them simply and concisely to you.
Are you compatible?
Your agent should be compatible with you, and your values and beliefs.
Any decisions they make on your behalf should align with your wishes and preferences.
When choosing the agent for your power of attorney, you should always pick someone who meets the above criteria and who you feel comfortable working with.
Craft the right POA for your needs
Your power of attorney document needs to be concise and clear for everyone involved.
You can take the legwork out of it by using one of PandaDoc power of attorney templates.
PandaDoc offers a huge range of documents to choose from, and their templates are highly customizable.
Frequently asked questions
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A financial power of attorney is the most common form since it allows the agent to make financial decisions on behalf of the individual. A healthcare power of attorney would be more appropriate for someone with specific healthcare needs or concerns.
A durable power of attorney could be best for some, as it remains in effect even if the individual becomes incapacitated or otherwise unable to make independent decisions. However, a limited power of attorney might be preferable for someone who only needs assistance with specific tasks or decisions.
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A power of attorney provides the designated agent with the legal authority to act on behalf of the individual who granted the power of attorney. This authority can vary depending on the type of power of attorney, but it can include the ability to make legal, financial, or healthcare decisions on behalf of the individual.
The extent of the authority granted depends on the specific terms outlined in the power of attorney form.
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A power of attorney agreement has the potential to be abused or misused by the designated agent. They could use their power to make decisions on behalf of the individual that do not align with their wishes or values.
Additionally, if the individual becomes incapacitated or unable to revoke the power of attorney, they may be unable to prevent the agent from making decisions they disagree with. It’s vital to choose a trustworthy and reliable agent and regularly review and update the agreement.
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You can’t exactly “get around” a power of attorney as long as it is legally valid and enforceable. Only the person who granted the power of attorney can revoke or modify it, as long as they are mentally competent to do so.
In some cases, a power of attorney could be challenged if there is any evidence of fraud, undue influence, or coercion involved in its creation.
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If you want to know how to sign a power of attorney, you typically need to sign the document in front of a notary public or witness. The specific requirements vary depending on the jurisdiction and the type of power of attorney being signed.
Disclaimer
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