Most people do not think twice about a Power of Attorney (POA) until life throws them a curveball. So, congratulations on taking the time to understand it now! A Power of Attorney is a legal document that grants another person (the agent) the authority to make decisions and take actions on behalf of the principal (the person granting the power). A Power of Attorney can also serve a practical purpose in planned situations, such as when you are buying a home but decide not to attend the closing in person, and you authorize someone you trust, to sign the documents on your behalf.
A POA is also invaluable in life's unpredictable moments, such as if an accident leaves you hospitalized and temporarily unable to manage your affairs. However, before your POA can take effect in those situations, it is important to understand how incapacity is determined. Determining incapacity can be handled in several ways. A spouse or health care proxy might make the call, or a disability panel — consulting doctors as needed — can decide by majority or unanimous vote. Some POAs rely on two licensed physicians or the attending physician, while others combine a life partner and doctor, with alternatives if the partner isn’t available. The key is to spell out how incapacity is determined so your wishes are honored, and decisions can be made quickly, without confusion or delay.
POA Powers: What Can Your Legally Do?
The powers given to an agent may be broad or narrow such as:
- Finances: paying bills and overseeing investments
- Real estate: buying/selling and contracting for property maintenance
- Taxes and government benefits: filing tax returns and applying for Medicaid
- Personal care and daily needs: accepting mail/packages and arranging transportation
Residency and State Requirements
Where your agent lives can matter for a POA. Some states require the agent to reside in the same state as the principal. Even when not legally required, distance can create practical challenges. An agent who resides in a different state may slow down document signing or make financial transactions more challenging. Since families are often spread out it is wise to choose an agent (or at least one successor) who lives nearby, ensuring your plan works smoothly in real life, not just on paper.
The Importance of Successor Agents
A successor agent acts as your Plan B. If your primary POA agent passes away, becomes incapacitated, or simply cannot serve when needed, the successor automatically assumes the role — without any need for court intervention.
This structure offers three advantages:
- Continuity: You ensure there is always someone ready to act on your behalf.
- Simplicity: Only one person needs to sign or make decisions at a time.
- Clarity: Everyone knows who is in charge, reducing the chance of family conflict.
It is natural to want to name more than one person to share responsibility—especially if you have multiple adult children. However, naming joint agents under a Power of Attorney often creates more problems than it solves.
Too many cooks in the kitchen can spoil the broth.
When two or more people must act together on every transaction, simple tasks like signing a check, may become logistically difficult. Imagine trying to get two people in different states to sign the same legal document on short notice — or agree on an urgent decision. Instead, best practices suggest naming one primary agent with one or more successor agents who can step in if the first person is unable or unwilling to serve.
Different Types of Powers of Attorney
A Power of Attorney specifies when the powers take effect and under what circumstances they can be used. There are several common versions of POAs, each serving a unique purpose:
Types of POA Generally Permitted in Most States:
- Durable Power of Attorney: Remains effective even if you become incapacitated.
- General Power of Attorney: Grants broad authority, ending if you become incapacitated.
POAs for Adult Children
When a child turns 18, parents lose the legal right to make medical or financial decisions on their behalf, even in emergencies. A Medical and Financial Power of Attorney ensures that a parent or trusted adult can step in quickly if the young adult is incapacitated, or temporarily unable to act.
Other Less Common POAs
- Limited (or Special) Power of Attorney: Grants powers for specific tasks and timeframe (i.e., healthcare or a real estate transaction)
- Springing Power of Attorney: Effective only upon a defined event, usually incapacity
POAs and Financial Institutions: What to Know
Even with a properly executed Power of Attorney, banks, brokerage firms, and insurance companies have their own internal procedures for reviewing these documents. For example, when you present a POA to a bank, they usually upload it into their system and send it to their legal team to analyze and approve. This can feel frustrating – after all, why go through the effort of creating a POA if a bank may not accept it? Private institutions can make their own internal rules based upon their risk assessment of potential liability.
Sometimes, the institution will accept the POA but place certain limitations on an agent’s powers. For example, an agent may be permitted to open a new bank account and transfer funds but not allowed to change an existing account into a joint account or remove other owners.
This review process is one of the many reasons to avoid “do-it-yourself” or generic online POA forms. Trying to save money upfront with a DIY form often ends up costing far more in time, legal fees, and frustration later.
A Practical Step Forward
While POAs can be highly effective, no single legal document can address every possible need in estate planning. A POA alone is not a substitute for a Living Will, an Advance Health Care Directive, or a Living Trust.
As Admiral William McRaven reminded us in his viral “Make Your Bed” speech, taking small, decisive steps today sets the stage for the bigger victories tomorrow. Estate planning works the same way — the sooner you act, the stronger your plan will be when life throws unexpected challenges your way. Starting with a POA ensures your family can act decisively when every moment counts. Schedule a consultation today to make sure your POA and overall estate plan are tailored to protect your wishes and those of your loved ones.
If you are in need of assistance, the attorneys at Collins Family & Elder Law Group can help.
