What Is a Power of Attorney? A Plain Guide

A power of attorney is one of the most practical legal documents a person can have. It allows someone you trust to make decisions and handle tasks for you, whether you are traveling, recovering from an illness or no longer able to manage your own affairs.

Despite how common it is, many people are unsure what a power of attorney actually does. This guide explains the basics in plain language. It is general information, not legal advice, and the rules vary by state.

The Basic Idea

A power of attorney is a written document in which one person, called the principal, gives another person authority to act on their behalf. The person receiving that authority is often called the agent or attorney in fact. The agent does not need to be a lawyer.

The document describes what the agent can do. That might include paying bills, managing bank accounts, signing documents, handling real estate or dealing with government agencies. The agent is expected to act in the principal's best interest and keep the principal's money separate from their own.

Common Types

Not every power of attorney works the same way. The main types differ in how broad they are and when they take effect.

General Power of Attorney

A general power of attorney gives the agent wide authority over the principal's financial and legal matters. In many states, it ends automatically if the principal becomes incapacitated unless it is written to continue.

Durable Power of Attorney

A durable power of attorney stays in effect even if the principal can no longer make decisions. This is the type many people use for long term planning, because it allows a trusted person to step in without the family needing to go to court for a guardianship or conservatorship.

Limited Power of Attorney

A limited or special power of attorney covers a specific task or period of time, such as selling a single property while the principal is out of the country.

Health Care Power of Attorney

A health care power of attorney, sometimes called a health care proxy, lets an agent make medical decisions if the principal cannot. It often works alongside a living will, which states the principal's wishes about treatment.

Choosing an Agent

The most important decision is who to appoint. The agent should be trustworthy, organized and willing to take on the responsibility. Many people choose a spouse, adult child or close friend.

It is wise to discuss the role with the person before naming them. Some people also name a backup agent in case the first choice is unable to serve.

Keep in mind that an agent has real power over your affairs. Choosing someone simply out of obligation, rather than trust and ability, can lead to problems later.

Making It Valid

Requirements depend on the state. Many states require the principal to sign the document while mentally competent, and many require notarization, witnesses or both. Some states provide official forms. Banks and other institutions may have their own review process before they accept a document.

Because mistakes can cause the document to be rejected when it is needed most, many people work with an attorney, especially for durable financial or health care powers.

When It Ends

A power of attorney generally ends when the principal revokes it, when the purpose of a limited document is completed or when the principal dies. At death, authority usually passes to the executor of the estate under the will instead.

A principal who is still competent can typically revoke a power of attorney by notifying the agent in writing and informing any institutions that relied on it.

The Bottom Line

A power of attorney gives you a say in who will manage your affairs if you cannot. Taking time to create one, and choosing your agent carefully, can spare your family stress and uncertainty later. For advice about your situation, speak with a licensed attorney in your state.