What Is a Power of Attorney?

What It Does

The person creating the document (the “principal”) names an “agent” (also called attorney-in-fact) who can step in to handle specified matters. A financial power of attorney might let your agent pay your bills and manage investments if you’re hospitalized. A health care power of attorney lets your agent talk to doctors and make treatment decisions if you can’t communicate.

Choosing an Agent

This is the most important decision in the document. Choose someone you trust completely, who is organized, willing to serve, and able to set their own interests aside. Name a backup agent in case your first choice can’t serve. And tell the person — being named agent shouldn’t be a surprise.

Important Limits

• A power of attorney ends at death — it is not a substitute for a will or trust.
• Agents must act in the principal’s best interests; using the authority for personal gain is abuse.
• Banks and institutions sometimes question older documents; keeping yours current helps.
• Requirements for a valid power of attorney — signatures, witnesses, notarization — vary by state.

When There Is No Power of Attorney

If someone becomes incapacitated without one, families often must petition a court for guardianship — a slower, more expensive, and more intrusive process. This is why planners consider powers of attorney among the most important documents an adult can have.