Although no one wants to think about needing it, a POA is essential for lifetime planning.
Why? Imagine if an accident, illness or age leaves you unable to communicate your healthcare wishes to your doctor. Or, you’re unable to manage your finances. What would happen to your assets? Who would manage your healthcare?
If you don’t generate a POA in advance, a friend or family member might have to go to court to have a guardian appointed – and that process can be lengthy, expensive, and very public.
In this article, we’ll explore what authority the POA grants, the different types of POAs, and the role of your agent.
And, we’ll also find out precisely what “durable” means.
What is a power of attorney (POA)?
A power of attorney (POA) is a person who can act on the behalf of another.
A power of attorney document gives someone else the right to manage a person’s affairs if they are unable to manage them themselves due to sickness or incapacitation.
There are several different types of POAs. Each type gives the attorney-in-fact different levels of control and authorizes them to do different things.
All states accept powers of attorney, but the rules and requirements can change. You may revoke a POA at any time, but most states require you to provide written notice of revocation to your agent.
What is the purpose of a POA?
A POA can give one person (the agent) the authority to make health care decisions, financial transactions, or make other legal dealings on behalf of someone else (the person).
Typically, they are used when someone becomes temporarily or permanently ill, disabled, or otherwise can’t make legal decisions independently.
For example, the agent might sign the necessary documents for a financial transaction on behalf of yourself or authorize a vital healthcare procedure.
They can sell a car, buy a home, or sign a contract for you. They might even sign off on life-saving surgery or medical treatment.
In a nutshell, with very few exceptions, a power of attorney can give the agent the right to do anything you would do for yoursefl.
Duties and responsibilities of your agent
The attorney-in-fact, or agent, is a fiduciary.
That means they are responsible for managing another person’s affairs. How much or how little they are responsible for, though, can vary greatly. It all depends on the nature of the POA.
There are no hard and fast rules; an agent’s legal authority can be broad or limited.
The agent must act responsibly, practically, and fairly to the person whose affairs they are overseeing. Anyone who takes advantage of their powers can face criminal charges or be held liable in a civil lawsuit.
What are the limits to a power of attorney?
While all POAs are different, your contract will outline what your agent can and can’t do.
As a rule, the person granted power of attorney has a legal duty to make decisions in the best interests of the person they represent.
No matter where they operate in the United States, there are a few responsibilities they aren’t allowed to take on.
- Contract a marriage in most states, though a few do allow it
- Make, amend, or revoke a will
- Use a person’s assets or money as their own
- Vote on behalf of a person
- Transfer responsibility to another agent
- Change or violate the terms of the POA
- Make any legal or financial decisions after a persons’ death
In addition, a power of attorney is not legally binding until it’s signed and executed according to the laws of your state. You must be mentally sound when you appoint an agent.
You can outline any terms you feel need clarification in your POA document. Using fill-in-the-blank templates, like what you would find at PandaDoc, can simplify the process of nominating your power of attorney.
What are the different types of POA?
Several types of POA exist, including durable and non-durable, medical, financial, and military. Most POA’s are separated further by general and limited powers, and these attributes determine what your POA can do for you.
General power of attorney
A general power of attorney gives broad capabilities to your attorney-in-fact, as allowed by state laws.
Under these agreements, the agent may be authorized to:
- Make medical decisions
- Make legal choices
- Make financial decisions
- Give gifts to charity
- Conduct decisions regarding life insurance
- Much more
A general POA is an appropriate choice if you’re leaving the country and need someone to manage your business affairs.
You may want to choose a general POA if you’re physically unwell and need someone to take control of healthcare decisions.
General POAs are often included in the estate planning process, so if you need to add one to your team, fill out the general power of attorney template by PandaDoc.
Limited power of attorney
A limited power of attorney (or special power of attorney) limits the agent’s authority to a specific event or industry.
But, if you need someone to act on your behalf for a business transaction you can’t be present for, the power of attorney might authorize the agent to represent you at that moment.
Other, more specific types of POA can expand or restrict an agent’s decision-making powers. Some examples include:
- Springing power of attorney. A springing POA doesn’t activate until you’re declared mentally incompetent or physically incapacitated, unlike a regular POA, which becomes effective as soon as you sign it.
- Medical power of attorney. A medical power of attorney, or healthcare power of attorney, grants your agent authority to make important decisions about your medical care. Your agent can make decisions while you’re in a coma, mentally incompetent, or otherwise unable to speak for yourself.
- Financial power of attorney. This POA gives your agent the ability to manage your finances and property when you’re not present. It can be a tool for planning for future incapacities or used for short-term purposes – for example, a deployed service member could appoint someone to pay their bills while they’re away.
There’s no reason you have to draft any document by yourself.
PandaDoc can set you up with over 700 templates, including this medical power of attorney template, when you need to create, edit, or send over your DPOA contracts to your lawyer.
How does a power of attorney and a durable power of attorney differ?
Most powers of attorney won’t be effective after you become incapacitated.
They only authorize the agent to represent a person as long as they’re mentally competent.
The moment they become mentally unsound, the agreement automatically ends.
A durable power of attorney (DPOA) remains in effect if you become ill, disabled, or mentally incapacitated.
That means that the agent remains in control of certain legal, medical, or financial matters (which are specified in the agreement), even after you’re incapable of handling your own matters.
You can state when you want the agreement to become effective in your DPOA – immediately after the document is signed or after a doctor declares you incompetent.
You’re allowed to choose the doctor that will hold authority over you if you become incapacitated, so pick the right person for the job.
Can a POA and a DPOA be used for the same things?
A power of attorney and a durable power of attorney can give an agent the same powers, so there aren’t many differences between the two.
You can use both attorneys for healthcare, finance, or pretty much anything else you want to designate for someone else to handle for you.
The difference is that a DPOA will remain in effect even if you become incapacitated.
It’s a good idea to have a DPOA on file if you fall victim to an unexpected accident, illness, or injury that may make it impossible for you to handle your healthcare or financial matters.
Does a DPOA ever expire?
A durable power of attorney can end when a court invalidates it, the agent can no longer carry out their responsibilities, or the person included in the document dies.
Today, most states do not require the renewal of a power of attorney for continuing validity. However, some institutions, such as banks, might refuse to honor an older DPOA.
In addition, you should periodically review your power of attorney and consider whether your choice of agent still meets your needs.
If your POA or DPOA needs an update, check out this power of attorney form template on PandaDoc.
DPOA and living wills
When it comes to end-of-life planning, durable powers of attorney and living will go hand-in-hand. A living will consist of directives for medical personnel to follow.
A will only comes into play if you are permanently unconscious or terminally ill and are unable to communicate.
If that’s the case, they’ll allow you to choose whether to refuse or accept life-sustaining treatment in advance. A will typically pertain to information related to life support, CPR, and interventions such as tube feeding.
Since a living will only applies to decisions regarding life-sustaining treatment, it’s crucial to have a document such as a DPOA.
The agent you appoint can make any decision you direct, including decisions about health care beyond those covered by your living will.
For example, the agent under a durable power of attorney can make decisions about your care if you are in a medically induced coma but not terminally ill.
The terms of a durable healthcare power of attorney are effective as soon as you sign. Or, you can choose to make or communicate a decision on your own terms.
Psst! If you haven’t created a will yet, or you need to edit yours to include your DPOA, use this last will and testament template available on PandaDoc. Just fill in the blanks!
How much financial power does an attorney-in-fact have?
When you create a durable power of attorney, you give your agent the authority to act on your behalf.
Usually, you’ll give your attorney-in-fact the capacity to handle all of your finances. But, you can give your agent as much or as little power as you want.
Do medical and financial POAs have to be separate documents?
When creating your POA or DPOA, it may seem wise to combine healthcare and finances into one document. However, experts say it’s best to state these needs separately.
When you create a separate document, you have the choice to name a different agent for each purpose.
What if your medical agent is awful with finances? Or what if you don’t want to share your medical information with your financial agent?
You can keep your financial and medical affairs private by having separate documents.
Who needs a durable power of attorney?
Have you ever heard the saying, “Hope for the best, but plan for the worst?” That’s where a durable power of attorney comes in.
Just about anyone with financial assets should consider a DPOA.
Some examples include:
The only exception may be a single adult who does not own a home and has no children. But, even then, you should expect the unexpected – you never know when someone may need to make medical decisions on your behalf.
Who may serve as attorney-in-fact?
Technically, you can name anybody you choose as your agent as long as you’re competent when making a choice.
There are only two hard and fast rules:
Your agent must be at least 18 years old and of sound mind.
With that in mind, when designating your attorney-in-fact, it’s crucial to find someone whom you know and trust. Your attorney-in-fact person doesn’t actually have to be an attorney.
The person who acts on your behalf could be a trusted family member, friend, or acquaintance. It’s important to find someone who will act in your best interest.
Choosing someone to act as your agent
Many people choose their spouses and their children to act as agents.
Remember, your agent may have access to your bank accounts, the power to sell your property, or the ability to make life-altering healthcare decisions. This isn’t a decision you should take lightly.
In addition, this person will act with the same legal authority you would have, so any mistakes made by your agent may be challenging to correct.
Consider appointing one or more successor agents to address the possibility that your attorney-in-fact will be unavailable or unable to act when the time comes.
What happens if you don’t have a DPOA?
If you don’t have a durable power of attorney and cannot manage your personal or business affairs, a court may appoint one or more people to act for you.
If the issue goes before a judge, they will likely choose a person or entity unrelated to you.
Ideally, a relative will step up to the occasion, but you can’t guarantee they won’t act maliciously.
You can avoid this scenario by appointing a DPOA ahead of time.
Think about it this way: if your friends or family members have to show up in court, you’ll have no way to object to what they plan to do or say.
That’s a scary position to be in, especially if you aren’t close with your family members. If you’re in a coma, you could be gambling with your life.
Do you need an attorney to draft your DPOA?
Short answer: No.
To make your DPOA legally binding, you just need to sign and execute your document according to the laws of your state.
Most states require you to sign in front of a witness, but your jurisdiction may ask you to get the document notarized. Consider giving a copy to your agent or letting your agent know where they can find the original if needed.
Remember: You don’t need an attorney to terminate your DPOA. You can end the agreement any time if you expressly revoke it.
You may also set a specific end date for your agreement. While other contracts will become void if the person who signed becomes mentally incapacitated, that isn’t the case with a DPOA.
Create and send forms with PandaDoc
No one likes to think about the worst-case scenario, but unexpected accidents and injuries happen all the time.
Making a durable power of attorney ensures that someone you choose will carry out your healthcare or financial wishes when you cannot make those decisions yourself.
Many people prefer to work with a lawyer to create a durable power of attorney. However, you can file this legal document yourself, as well.