What is a Power of Attorney?

Power of Attorney

What is a Power of Attorney?

A power of attorney (POA) is a legal document that allows someone else to act on your behalf.

Powers of attorney can be helpful to people who want to choose a trusted person to act when they cannot. Creating a POA is a private way to appoint a substitute decision-maker and is relatively inexpensive, with help from a lawyer. If you don’t create 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.

A financial POA can be used as a tool for planning for future incapacity – an inability to make financial decisions due, for example, to dementia, traumatic brain injury, or some other impairment that affects mental function. When used for advance planning, a POA generally is “durable,” meaning it continues to be effective even if the person creating it becomes incapacitated.

A financial POA can also be used for short-term purposes: for example, if a servicemember is deployed overseas, he or she may create a POA so someone can pay bills, sell property, or handle other business in his or her absence.

However, a POA does involve some risk. It gives someone else – your agent – a great deal of authority over your finances without regular oversight.

POA abuse can take many forms:

  • The POA document itself may be a forgery
  • Your agent might pressure you for authority that you do not want to grant
  • Your agent may spend your money on himself rather than for your benefit
  • Your agent might do things you didn’t authorize him to do – for example, make gifts or change beneficiaries on insurance policies or retirement plans