How To Assign Power of Attorney | GoodTrust
Power of Attorney: Definition, Types, and How to Assign or Revoke
There are many different reasons you might assign someone power of attorney (POA). But do you know what type of POA to assign? And how to legally grant someone POA? In this article, we’ll cover what power of attorney means, the different types of POAs, and steps for choosing and legally assigning someone POA. When someone is granted power of attorney (POA), they're permitted to make financial and legal decisions on behalf of another person in specific circumstances.
What Is Power Of Attorney?
POA is the document's name, "agent" or "attorney-in-fact," are the names for the person granted POA. There are many reasons a person may grant an agent POA, including:
Health problems that may lead to incapacitation
Getting a job abroad; the agent handles issues in the U.S.
Traveling frequently; the agent handles issues in your hometown
Working a risky job where incapacitation is possible
Being a cautious older adult
You could also opt to grant POA if you have statistically risky hobbies, a family history of unexpected ailments (e.g., heart attacks or strokes), a personal history of illness or addiction, or simply out of an abundance of caution with no extenuating circumstances. When granting someone POA, you can choose what powers they have and when they can execute them. What they can do and when they can do it is partly determined by the type of agent they are. Note: If you're already deemed incapacitated, you can't choose an agent.
What Does "Incapacitated" Mean?
Throughout this article, you're going to see the word "incapacitated." Regarding POA, "incapacitated" means an inability to make sound decisions, inability to reasonably communicate decisions, or lack of consciousness. If someone cannot speak but can communicate via writing, and their thoughts are unquestionably clear, they aren't incapacitated.
Types of Power of Attorney
Many people don't realize there is more than one type of power of attorney. So, when considering asking someone to take care of your legal or financial needs, be sure you grant the type you want and that they understand what abilities they have. There are four overarching types of POA:
General power of attorney
Financial power of attorney
Special or limited power of attorney
Durable power of attorney
We’ll go over each in detail below.
General Power of Attorney
An agent with general POA can make legal and financial decisions (including signing relevant forms) on your behalf. However, their right to do this stops when you become incapacitated; general POA is not intended for use in end-of-life circumstances. You may want to grant someone general POA if you're traveling, or otherwise want someone else to act or make decisions on your own behalf. For example, in California you can assign someone POA to transfer ownership of a vehicle to a new owner on your behalf. If you want to ensure someone can take care of your decisions if you're incapacitated, you either need to grant them durable POA or special or limited POA. General power of attorney alone won't allow this.
Financial Power of Attorney
Financial POA allows your agent to make financial decisions on your behalf, even if you're not incapacitated. Unlike general power of attorney, your financial agent may not make other legal decisions. You choose what tasks they can perform, and they may not perform other tasks without obtaining a court order. Rights commonly granted to agents with financial POA include:
Paying your bills
Closing or pausing accounts that aren't strictly necessary (e.g., streaming services)
Running your business
Managing current investments or making new ones
Hiring legal representation for you
Managing your property (including buying and selling homes, cars, etc.)
Handling your bank account or other assets
You may opt to only allow them certain rights if you're not incapacitated and expand their rights if certain events occur.
Special or Limited Power of Attorney
Special power of attorney, also called limited power of attorney or LPOA, lets someone make certain monetary or legal decisions for you under very specific circumstances. Like general power of attorney, LPOA is only active while you're capable of intervening on your behalf (i.e. when you’re not incapacitated). However, unlike general POA, your agent doesn't have free reign over your financial and legal life. For instance, you could need to quickly move out of state and therefore don't have time to sell your home. You may opt to grant limited power of attorney to a friend or family member in that state, allowing them to complete the home sale on your behalf. They can make all decisions and sign all paperwork, but only if it relates to the home sale—any other financial or legal decisions still fall on you.
Durable Power of Attorney
Unlike general POA, which becomes invalid when you become incapacitated, durable power of attorney continues if this happens. "Incapacitated" means you're ruled incapable of making decisions for yourself, whether because you're unconscious, comatose, in a vegetative state, or have mental impairments that have rendered your judgment unsound (e.g. advanced dementia). You may wonder why you would want to give someone general power of attorney but not durable POA. It's always a personal decision, but it often comes down to who you want to take care of your decisions while you can still have active input and who you want to take care of decisions if you can no longer have a say in them. Your general and durable POA agents may not be the same person for a variety of reasons. For instance, if you have no local family and need someone to sign legal or financial documents for you while you travel, you may choose a nearby friend to have general POA. However, if you become incapacitated, you may not want that friend to make legal and financial decisions on your behalf. Durable power of attorney generally allows someone to make decisions both while you're healthy and if you're incapacitated. But what if you want someone to only make decisions while you're healthy and someone else to only make decisions if you're in a medical crisis? In that case, you would use a type of durable POA called "springing" or "conditional" POA. This kicks in only when you become incapacitated.
Durable Financial Power of Attorney
An agent who manages your finances if you become incapacitated has durable financial power of attorney. Basically, if it involves money, the person with durable financial POA can do whatever tasks you ask of them. If you ONLY want them paying your bills, you need to make that explicit. If you want them to sell your house for whatever reason, you need to expressly give them that power. If you know who you’d like your agent to be and what decisions they should make, start creating a durable financial power of attorney today.
Durable Medical Power of Attorney
Durable medical POA, also called POA for healthcare, allows your agent to decide the types of medical treatments you receive. If you know what you want to be done if you're incapacitated, be sure to create an advance directive. Advance directives allow you to state your wishes for medical care when you’re not able to express them yourself. You may consider consulting with a doctor or lawyer to ensure your wishes are feasible. Writing an advance directive makes your agent's job easier. They don't have to try to make educated guesses about what you would want; they just have to follow your requests. If you don't write an advance directive but have granted someone medical POA, they can make medical decisions of any sort so long as the decisions are legal and permitted by the treatment center. So, when choosing someone to have medical POA, pick someone you know will fight for your wishes or, if they don't have those details, make educated guesses rather than base decisions on emotions or their own values.
Should I assign the same agent both durable financial and medical power of attorney?
Having the same person or different people acting as agents for your durable financial and medical powers of attorney is a personal decision. Still, there are some important things to consider. A significant reason to consider having the same person acting with both durable medical and financial POA is that medical and financial decisions often go hand-in-hand, especially towards the end of life. An agent who just has durable medical POA can give as many medical orders as they want, but they can't necessarily decide if your money is spent on those treatments. Likewise, an agent with durable financial POA can't tell doctors what to do, but they can choose whether or not to pay for treatment. If you opt to have separate people acting with medical and financial POA, make sure they are people who both understand your desires and will work well together.
How to Choose a Power of Attorney Agent
When you are deciding who to ask to be your agent, there are several questions to ask yourself: 1. Do I want more than one person to have power of attorney? 2. Who do I trust to remain level-headed in the event of an emergency? 3. Do their values align with my own, meaning they'll follow my wishes even if they're difficult (e.g., not wanting to be kept on life support)? 4. Who do I know who is good with money? 5. Who do I know who understands medical terminology (or is comfortable speaking with medical professionals)? 6. Am I choosing this person out of a sense of obligation or because I genuinely want them to oversee these decisions? 7. Is this person in good enough health for me to trust they'll be around if I need them to use their POA? Once you've answered these questions, you may be better prepared to choose a person or people to act on your behalf. Try to keep emotions out of your power of attorney decisions, as hard as it may be. You don't owe anyone power over your medical or financial future, no matter how much you love them and they love you.
Giving Your Children Durable POA
If you have adult children, you may want to consider using them as your durable power of attorney agents. However, you are under no obligation to do so, and they should have a say in the decision if you're considering them. Your children may be a good choice if you trust them to remain level-headed, follow your wishes, and to be frank, not make decisions based on their inheritance. Researchers have noticed a rise in what they've dubbed "early inheritance syndrome" in which "children seek ways for their parents to give them money, or interfere in the management of their parents' assets to protect what they see as their entitlement." Financial abuse is the most common type of elder abuse, and this abuse applies to people who are otherwise struggling to manage their finances or become incapacitated. As early inheritance syndrome most commonly affects adult children who manage their parents finances, it is certainly something to consider. No one wants to think this is possible with their children, and for many children, it isn't. But no matter who you choose as your power of attorney agents, having a lawyer write up the paperwork to ensure all t's are crossed and i's are dotted could bring peace of mind. We aren't telling you to rule out your children entirely. Your adult kids may be the perfect agents and, later, executors for your will. We are simply advising caution, as we do with any other choice you make in assigning someone power of attorney.
5 Steps for Assigning Durable Power of Attorney
Durable POA requirements vary slightly by state, as some may be stricter than others. When in doubt, research local laws or reach out to a lawyer for assistance. However, the basics tend to be universal.
1. Speak to a Financial Advisor, Lawyer, and/or Your Doctor
Before assigning durable power of attorney, you’ll need to write down the types of decisions you want your agent to make on your behalf. If you're able to, speak to a financial advisor, lawyer, and/or people on your medical team about what the best routes are for you. You may choose to create an advance directive at this point or simply create a list of desires and have your advisors help modify them as needed. The financial advisor can help you identify and manage assets, debts, and future expenses that your agent will need to deal with. A doctor can advise you about your rights and ensure you understand what you're putting in your advance directive. Some of these directives are more legally binding than others, and your doctor can help you understand what your state allows, what your doctor will agree to, and what type of forms you need. Lawyers can double-check all forms to ensure they're reasonable and legal.
2. Secure Your Durable Power of Attorney Agent
Once you've decided who your agent(s) will be and have ensured they are comfortable carrying out all your wishes, you need to guarantee there can't be any confusion about who this person is. Compile all personally identifying information, including:
Full legal name (including things like "Jr.")
Exact relationship to you
This ensures that if you know people with similar names, they can't be confused with each other. If their contact information changes, you may need to update that information in your POA form as well.
3. Find and Fill Out a Power of Attorney Form
Fill out a durable power of attorney form using the information your agent provided in the previous step. According to Forbes, "Many states create what are referred to as 'statutory powers of attorney.' These are standard documents intended to work in that particular state. These forms may be accepted more readily in your state than a more comprehensive Internet form." Statutory power of attorney forms can often be found for free on official state government websites. Since they're provided by the state, they should be legally acceptable. Many other forms you can find online are comprehensive and would be deemed legal by your state, but they could require a lot more work on your part and, perhaps, cost money. On the other hand, using this state-provided option could be both free and comparatively easy, especially if you get it reviewed by a lawyer before completion.
4. Sign and Notarize Your Power of Attorney Form
Your state determines how signatures need to be handled. Do you need witnesses? Notaries? Both? Check your state laws and ensure they're filled out correctly.
5. Keep Your Power of Attorney Forms Safe
Once your power of attorney forms are complete, make physical and scanned versions. The physical copies should be kept in a few different places:
With your power of attorney agents
With your other necessary paperwork, ideally in a firebox
With all members of your medical team
With your lawyer, if relevant
With your financial advisor or other financial institutions, if relevant
As for the scanned copy, the best thing you can do is upload it to a digital legacy platform that can securely store your documents.
How to Change or Revoke Power of Attorney
Perhaps your agent has died, moved too far away, or has otherwise become unable to carry out their duties. Maybe you're no longer comfortable with this person having so much control over your future. Or, you could simply have new wishes and need to update your documents. Whatever the reason, you can opt to change or revoke an agent's power of attorney rights by following these steps: 1. Decide what changes you want to make. 2. Prepare the revised paperwork, using a new power of attorney form. 3. Submit a Notice of Revocation or Revocation of Power of Attorney form, which may require notarization (check your state’s laws for requirements) 4. Update all interested parties about the revocation and new POA form. 5. Submit the new POA form. Don't forget to replace all your current printed and scanned copies with copies of your revocation and replacement power of attorney forms.
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