Power of Attorney (POA): Meaning, Types, and How To Setup One

What Is a Power of Attorney (POA)?

Power of attorney (POA) gives a designated person the power to act for another. A POA authorizes the agent or attorney-in-fact to act for the principal.

The agent may or may not have a lot of power over the principal’s property, money, investments, and medical care.

Financial and health care POAs might be broad or restricted.

Main Points to Understand

  • A power of attorney lets someone act for another.
  • The agent or attorney-in-fact is given power by the principal.
  • The agent might have wide or restricted control over the principal’s property, money, or medical care.
    When the principle can’t sign financial papers, the POA is employed.
  • If the principal becomes sick or handicapped, the durable power of attorney continues in force.

Process of a POA and Its Effects

An agent, or attorney-in-fact, and the principal are both parties to a power of attorney.

It is used when a person can’t sign legal papers because they are sick or can’t do it for some time or forever.

The principle is responsible for selecting a reliable POA to act on their behalf.

A lawyer or an internet document service may provide you with the necessary paperwork. Contractual documents must be signed by both parties.

It is customary to have a third person present as a witness.

Most powers of attorney allow the agent to handle the principal’s real estate and financial matters as long as the principal is of sound mind.

If a party loses the ability to make their own decisions, the agreement terminates immediately.

A power of attorney can end if the principal revokes it, dies, the court throws it out, or the agent can’t do the work.

If the principal and agent are married and then divorce, the authorization may become null and void.

Numerous forms of attorney-in-fact exist.

Unlike a springing power of attorney, which only takes effect in the event of the principal’s incapacity, a durable power of attorney goes into force as soon as it is signed.

One kind of restricted power of attorney only covers medical choices, allowing an agent to act on behalf of an incapacitated individual when necessary.

No matter how unlikely it may seem, everyone should think about drafting a power of attorney in case of unforeseen incapacity or the need for long-term care.

Someone who plans to be out of touch for a while may also need this.

A durable power of attorney (DPOA) should be signed by someone who wishes the authority to be maintained even if their health declines.

If the individual whose interests are being represented makes their power of attorney “durable,” it will continue in effect even if their principal loses mental or physical capacity.

This may happen, for instance, if the person falls into a coma or develops amnesia. Nonetheless, a power of attorney that is not “durable” terminates upon the client’s death.

The power of attorney loses its validity if the principal becomes mentally incapable of making decisions and the document is not defined as “durable.”

Read: How Insurance Works, Its Definition, and Main Types of Insurance

Exceptions and Cautions of POA

A power of attorney makes sure that someone will take care of your money if you can’t.

Choose a reliable family member, friend, or professional.

Signing a broad power of attorney is like signing a blank check, so choose wisely and understand the laws.

Types of Powers of Attorney

Powers of attorney for finances and healthcare are the two most common kinds.

We highlight the main types of financial POAs and outline some of the key differences between them.

Health Care Power of Attorney (HCPOA)

If a principal wants an agent to make health-related decisions, they can sign a HCPOA.

This document outlines the principal’s consent to give the agent POA privileges in case of a medical emergency.

The health care POA must make medical decisions for the principal.

It begins when the principal can’t make their own health decisions.

Financial Power of Attorney

The financial POA allows an agent to sign checks, file tax returns, mail and deposit Social Security checks, and manage investment accounts if the principal cannot understand or make decisions.

The agent must carry out the principal’s desires as outlined in the agreement. A financial POA allows the person to make deposits and withdrawals, sign checks, and modify beneficiary designations.

Financial POAs are categorised. general, limited, and durable POAs.

General Power POA

This POA authorises the agent to act in any situation authorised by state law. In this arrangement, the agent may handle the principal’s bank accounts, sign checks, sell property, manage assets, and file taxes.

Limited POA

A limited power of attorney gives the agent authority over specific matters or events. The agent may only manage the principal’s retirement accounts.

This POA may be temporary. If the principal is leaving for two years, the authorization may only be valid for that time.

Durable Power of Attorney (DPOA)

Even if the principal becomes mentally disabled, the durable power of attorney (DPOA) still controls some legal, property, or financial concerns.

A DPOA can pay medical expenses for the principle, but it can’t remove life support.

The broker requests the DPOA when the agent makes investment choices on behalf of the principal.

A “springing” power of attorney specifies when a durable POA becomes operative.

A springing POA specifies the occurrence or degree of incapacity before the DPOA takes effect. A dormant power of attorney may be activated by a bad health event.

A springing power of attorney should be properly designed to minimize complications while recognizing the triggering event.

Not all power of attorneys are lawyers. It might be a family member, friend, or acquaintance.

How to make a Power of Attorney

Obtain a POA template online. If so, be sure it meets state regulations.

This paper may be too crucial to leave it to chance that you used the right format.

Many states require the principal’s signature to be notarized. Some states demand notarized witness signatures.

Everyone who has to form a POA should be aware of the following countrywide restrictions:

  • State legislation and processes differ, hence there is no universal power of attorney form.
  • The power of attorney that lasts for years is recognised in every jurisdiction.

Some abilities can’t be assigned. These include the power to:

  • Wills may be made, changed, or revoked.
  • Few states allow marriage contracts, but most do.
  • Vote (although the guardian may seek a ballot on behalf of the principal) (but the guardian may request a ballot on behalf of the principal)

While the details may differ, the following rules apply coast to coast:

    • Some areas allow oral POA grants, but verbal instructions are no replacement for writing down each power of attorney for your agent. Clarity prevents conflicts and misunderstanding.
    • Format correctly: POA forms vary. Some POAs are temporary, while others are permanent. Prepare a POA with the desired powers. The POA must be state-approved. To locate a court-accepted form in your state, go online or consult a local estate planner. Use a lawyer.
    • Parties: The principle grants the POA. Agent or attorney-in-fact is the person with power of attorney. Check your state’s terminology requirements.
    • Powers may be delegated as the principle chooses. Even if a broad POA is given, each authority must be unambiguous. The principal can’t delegate “everything in my life”
    • Most states terminate a POA if the principal becomes disabled. If this occurs, an agent can only preserve their powers if the document is durable, meaning it lasts the principal’s lifetime until revoked.
    • Many states need notarized POAs. Even in jurisdictions that don’t, a notary’s seal and signature may help the agent. Not all powers of attorney must be registered to be lawful. Many estate planners and people record documents to prove they exist.
    • Some states require filing certain POAs with a court or government authority before they are legal. Ohio requires grandparents’ POAs to be filed with the juvenile court. The county where the property is situated must also register the POA.

Find a family law attorney in your state to start a power of attorney.

Legal services offices with credentialed attorneys are available almost everywhere in the U.S. Search for “Get Legal Help” on the Legal Services Corporation website.

Qualified clients receive free help.

Choose a Correct Power of Attorney

POAs offer ownership power and obligation, like a home or automobile deed.

Medical POAs are life-or-death. Mishandled or exploited durable POAs might lead to poverty or bankruptcy. Choose your agent carefully to guarantee your goals are fulfilled.

Choose a trustworthy, skilled agency. This individual will have the same legal power as you, so errors may be hard to fix.

Depending on the authorities you offer, self-dealing may be a risk. An agent may access your bank accounts, make gifts, and sell your property.

An attorney, accountant, or banker may be your agent. Your agent may be a spouse, adult child, or relative. Naming a family member as your agent reduces money and may keep personal information “in the family.”

When Children as Power of Attorney

Parents often designate adult children as POA agents.

The relative young of the kid is a benefit when the POA’s objective is to relieve an elderly parent of the strain of managing financial and investment affairs or provide management if the parent becomes incompetent.

In certain circumstances, a spouse listed as the agent may develop the same debilities as the POA’s originator, negating its purpose.

When the kid is honest, competent, and respects the parent’s wishes, this is the finest POA.

Parents may struggle to choose an agent from many children.

This is no easy choice. Your POA agent functions with your authorization, therefore expensive financial blunders may be tough to remedy. Favoring certain family members over others creates intrafamily strife.

In the wrong hands, a POA may be a licence to steal.

Agents can misuse their authority and make financial and medical choices for themselves rather than the principle.

Children’s personalities, talents, and situations vary, and their powers may prevent harm.

You may create several POAs for each child’s skill level, temperament, and competence to act on your behalf.


When choosing a child for a POA, consider these three factors:


This is a POA agent’s most significant quality. This includes honesty, reliability in performing regular tasks like investing and paying bills, and diligence in acting according to your wishes.

The Abilities of Each Child:

Various youngsters may be better equipped for different financial jobs. You may grant various children limited POAs for your money. Examples:

  • Taking care of the family’s regular bills
  • Having real estate as a source of revenue and outgoings
  • Managing one’s financial holdings
  • Insurance and annuity management
  • Carrying on a family enterprise

Multiple Agents:

A POA may specify many agents who can operate individually or together.

Having two children oversee ordinary issues may be convenient if one is absent, but needing two to agree on significant acts like selling a property helps ensure family agreement.

Multiple agents might produce disagreements. If two children are expected to manage an investment account jointly but disagree, it may be frozen.

When picking two children to function jointly as POA agents, make sure they have the abilities and personality to work together.

Risks of Child Power of Attorney

Agent mistakes and self-dealing may be expensive.

This is particularly true with a durable POA that offers wide authority over your affairs during incapacity.

You must be certain that the agent will follow your instructions, can do so, and will pursue your goals if necessary.

To prevent wounded emotions and maintain family unity, never identify a youngster as your agent.

Not if you lack trust. Too much authority should be based on trustworthiness and aptitude. If you have:

  • You have trouble explaining to the youngster the POA’s obligations.
  • The youngster may not be dependable owing to anxieties or diversions.
  • The youngster has gambling or drug issues.
  • The youngster has huge debts or is financially reckless.
  • The child may use POA rights to favour certain family members over others due to intrafamily tensions.

Say one child is a busy financial expert living in a distant city, while another works part-time and lives conveniently close by.

You can have one POA that names the first to manage your investment portfolio and another that names the second to manage your routine daily expenses and pay monthly bills.

General Risks of a Power of Attorney

Even if your kid is your agent, beware of theft and self-dealing.

To reduce the potential of misconduct, compel your agent to disclose all acts to an independent person, such as the family’s accountant or attorney.

Trust, but verify. A lawyer may construct your POA to incorporate state-mandated precautions.

As family circumstances change, update POAs.

You may withdraw a POA by writing and sending a letter to your former agent.

Some states demand a notarized letter, just like the paperwork.

Send copies to other parties the agent may have helped. Then give your new agent a new POA.

A power of attorney gives a trustworthy person legal authority to act in your best interests. Adult children who are trustworthy and competent may make the finest POA agents.

Don’t name your kid agent. First, be sure your agent is trustworthy and skilled.

Getting Your Parents to Make a Power of Attorney

There may come a time when you may become incapacitated and can’t manage your own affairs.

If you don’t have a POA in place that enables a named agent to step in and do so, nobody may have the legal right to do so.

No one may take a parent’s IRA distributions, borrow money to pay medical bills, or deal with the IRS about taxes.

It then will be necessary to go to court to seek to be named as a conservator or guardian for the parent, a course that may prove costly and slow. And it could be contested, leading to family conflicts.

You may choose to name one or more of your children as your POA(s). There are many different kinds of POAs and you can have more than one.

While a general POA enables the agent to act with the authority of the POA’s creator in all matters, a special POA can lim

There may come a time when you can’t take care of yourself and your own business.

If you don’t have a POA that lets a named agent step in and do it, nobody may have the legal right to do it.

For example, no one may be able to take money out of the parent’s individual retirement account (IRA), borrow money to pay medical bills, or talk to the Internal Revenue Service (IRS) about the parent’s taxes.

Then, you will have to go to court to try to be named the parent’s conservator or guardian, which may be expensive and take a long time. And it could be argued about, causing fights in the family.

You can name one or more of your children as your Power of Attorney (s). POAs come in many forms, and you can have more than one.

With a general POA, the agent can act on behalf of the person who made the POA in all situations.

With a special POA, the agent’s power is limited to a certain subject, like managing an investment account, or to a certain amount of time, like while the person who made the POA is travelling abroad.

Here are some things you should think about:

    • Start Small: A special POA can only be used to give you something that will make your life easier as a parent, like letting your kids prepare and file your tax return and handle your business with the IRS.
    • Safeguards: If you’re worried about your business, make sure the POA says the agent must report all actions to a trusted third party, like the family’s lawyer or accountant. Or, choose two agents and insist they agree on big deals like house sales.

Consult Trusted Advisors: Professionals you trust, like lawyers, accountants, and doctors, can help you see why and how important it is to have POAs.

These papers can be helpful for you and your family as a whole. You can give broad powers over time if you don’t feel comfortable giving them all at once.

But don’t wait too long, because the grantor must be mentally able to make a power of attorney or it could cost you.

If you can’t take care of yourself anymore, it’s too late. At that point, you might have to go to court.

Power of attorney can start as soon as the necessary papers are signed, or it can be set to start at a certain time in the future.

What Does Having Power of Attorney Do?

A power of attorney is a legal document that lets someone else do something for you.

Depending on how the POA is written, the person to whom it is given may have broad or limited legal authority to make decisions about a person’s property, finances, or medical care.

Whoever has power of attorney can do whatever they want.No. When a POA is made, the scope of the legal power it gives is set out.

Also, a person with power of attorney has a legal duty to make decisions that are in the best interests of the person they are representing.

Can a Power of Attorney be Overruled by a Next of Kin?

No, next of kin or other family members do not have the legal power to change or cancel a power of attorney that is already in place.

How do I take away the power of attorney I gave to someone?

You can end power of attorney if you tell them to stop. It could also end on a certain date or last for a certain amount of time.

Unless it is a “durable power of attorney,” it will also end if you lose your mental capacity. All powers of attorney end when you die.

Who can I give the right to act on my behalf?

You can technically give power of attorney to anyone, as long as you do it of your own free will and are mentally capable.

It should be somebody trustworthy and capable, such as a spouse, close family member, or friend. You can also give a POA to your lawyer if you want to.

In theory, you can give POA to more than one person, but this is not a good idea because it can cause problems and confusion.


If you make a power of attorney and explain how it will work, even if you lose your ability to think or function, you will have a plan in place for managing your finances and health care if and when you can’t.

Make sure you choose someone you trust and who will be able to do their job well on your behalf.



I am Dharmendra Jain, Owner of this website. In point of fact, the author, Dharmendra Jain, writes on Finance Niche, because he enjoys disseminating knowledge to people all over the globe. The author has expressed a desire to maintain communication with all of his or her devoted readers. And in order for me to be connected to the internet in the first place, it compelled me to do so.

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