As you age, your ability to make decisions may become compromised. You're also more likely to have a health situation during which you're unable to express your wishes. That's where a power of attorney comes in.
A power of attorney, also called a POA, is a document that appoints a person (an agent) to act on another's (the principal's) behalf.1 Agents have the power to make important legal, financial, and health decisions on behalf of the principal. An agent is often a caregiver, family member, or close friend, and sometimes it's an attorney.
Below, we'll take a look at the ins and outs of power of attorney, from choosing an agent to drafting the form.
What Is a Power of Attorney?
A power of attorney is an estate planning document that gives one or more people the power to make decisions and act on your behalf. The document outlines the actions your chosen agent can take, such as paying your bills while you're hospitalized and unable to do so yourself.
Types of Power of Attorney
There are several types of power of attorney and many ways to classify them. You may need multiple power of attorney documents depending on your wishes. Below are the five most common types.
General Power of Attorney
A general power of attorney gives an agent the power to act on your behalf and make business, real estate, financial, and legal decisions, such as paying your bills when you're out of the country or recovering in a hospital after surgery.
Some of the powers granted include:
- Managing your bank accounts and transactions
- Buying and selling real estate
- Paying bills
- Entering into contracts
A general power of attorney gives the agent a lot of power — and, thus, responsibility. Typically, the document is used only for a short period of time. It expires when you become incapacitated (unless you make it a durable general power of attorney) or pass away.
Durable Power of Attorney
A durable power of attorney gives your agent the right to make decisions and take the actions specified for the long term. Even if you are mentally incapacitated or deemed unfit to make decisions for yourself, your agent can still act on your behalf. Since most older adults need a POA only in case they become incapacitated, this is the preferred type.
Medical Power of Attorney
A medical power of attorney has you list a health-care agent who will make medical decisions on your behalf if you're unable to do so. They'll also make sure all your medical providers follow your do-not-resuscitate form or living will.
Expert Tip: Need help getting started with your living will? Head to our guide on how to make a living will.
Some of the areas over which they have authority include:
- Surgical procedures
- Medical treatments
- Organ donations
- The health care facility you use
- Release of medical records
Once signed, the medical power of attorney document takes effect immediately. Your listed agent, however, doesn't have any authority until a physician declares that you, the principal, are mentally incompetent. Medical POAs are always durable.2
Limited (Special) Power of Attorney
A limited or special power of attorney gives your agent the ability to carry out a specific task on your behalf. It's much more restrictive than a general power of attorney. For example, you may specify that your agent may cash checks for you. Some people choose to create several special POAs, each one listing a different agent and assigning a specific power.
A limited POA expires after the task is finished or after the time listed in the document.
Springing Power of Attorney
This type of POA “springs” into effect if a specified event or medical condition occurs. For example, you may write a POA that takes effect only when you turn 82 years old. A springing power of attorney lets you keep control over your affairs until the triggering event occurs.
For many, the triggering event is a doctor deeming you incapacitated, which is why this type of POA is often durable.
What Is the Difference Between a Power of Attorney and a Durable Power of Attorney?
A durable power of attorney lasts for the long term, even if the principal is deemed mentally incapacitated. On the contrary, a power of attorney document that does not use the word “durable” does not last for the long term. A nondurable power of attorney expires if and when the principal is deemed mentally incapacitated.
Understanding the difference is important. If you have only a nondurable power of attorney and you become incapacitated, the court may need to appoint a guardian or conservator for you. This process can be expensive and time-consuming, and you'd be unable to choose who your guardian or conservator is.
Helpful Tip: Read our all-encompassing finance guide for seniors to learn more about estate planning and other helpful financial information.
That's why a durable power of attorney works best for seniors who want someone to make decisions on their behalf if and when they become incapacitated. A nondurable power of attorney works best for specific tasks with an end date. One use may be if you need someone to sign a real estate document on your behalf, but you are unable to be there to do it yourself.
How to Get a Power of Attorney
Let's take a look at some steps you'll need to take to get a power of attorney.
1. Choose your agent(s)
You need to decide which trusted family member, friend, or attorney to list as your agent. Your agent will be entrusted to act in your best interest for whatever tasks are specified in the POA. Since a POA can grant powers such as control over bank accounts, paying bills, and making medical decisions for you, it's important to choose someone who's responsible.
You can make more than one individual your power of attorney, but that can cause complications depending on how you write your POA. If you want your agents to act jointly, for example, a decision could be delayed if there is a disagreement.
It's also a good idea to list alternate or backup agents. A backup agent steps in if your first choice is unable to carry out their duties. Specify in the POA when the alternate should step in, such as if the primary agent becomes incapacitated.
2. Choose your power of attorney type
Next, you need to choose what type of power of attorney you'd like. Depending on your wishes, you may draft multiple types, such as a medical power attorney and a durable general power of attorney. That way, someone can make medical and financial decisions on your behalf if you become incapacitated.
You'll also want to decide whether you're going to use a template, an online service, or an attorney to help you draft your power of attorney. Below, we provide some resources to help.
3. Add specifics to your power of attorney
Now it's time to write in detail how your agent is allowed to act on your behalf. Your chosen agent can only make decisions that you grant them the ability to make. Generic forms on the internet come with clauses already included. If you go that route, make sure you agree with those prewritten clauses and add any that are missing.
FYI: As you're deciding what clauses to include in your POA, it may be helpful to review your finances and make sure you're all set for retirement. Check out our retirement savings guide for tips.
4. Fulfill signing and notary requirements
Each state has specific power of attorney authorization requirements, which may vary depending on the type of POA you choose. Most states require a notary public or two witnesses. Make sure you follow your state's guidelines so your POA is valid and holds up to legal scrutiny.
5. Make sure everyone who needs a copy has one
You (the principal) and the agent should each have a copy of the power of attorney. A POA doesn't need to be filed with a court or government office.
Tips for Choosing a Power of Attorney Agent
Don't worry if you got hung up on Step One above. We have some tips for choosing an agent, courtesy of Jim Revels, a certified public accountant and member of the American Institute of CPAs Personal Financial Planning Executive Committee.
When choosing your agent, Revels says, you want someone who:
- Lives nearby
- Is willing and capable to serve
- Is financially responsible
- Is trustworthy
- Can be assertive
“Willing and capable to serve” is especially crucial. Being an agent comes with a lot of responsibility, so you need to talk with your desired agent beforehand. Make sure they want to serve in this role, and make sure they understand your wishes.
Did You Know: Choosing a relative may be what first pops into your head, but your agent does not have to be a relative. People who live far from family may find it easier to have a trusted local friend serve as their power of attorney.
Where Can I Get a Power of Attorney Form?
You can turn to an elder-law or estate-planning attorney to draft your power of attorney, or you can use POA forms or services online. Check out our curated list of services and companies that help seniors draft power of attorney forms online.
Nolo's Quicken WillMaker and Trust 2022
Two versions of this downloadable software let you create a health-care power of attorney, a durable power of attorney, and other estate-planning documents. The price ranges from $129 for the Plus software to $199 for All-Access. Check out the Quicken WillMaker product page to learn more.
LegalZoom offers several online tools to help you draft estate-planning documents online. Drafting a financial power of attorney starts at $35 and a health-care power of attorney starts at $39. LegalZoom even offers estate-planning bundles, such as creating a will, a financial POA, and a living will for $179 per person.
Rocket Lawyer provides free durable power of attorney forms to fill out online. Simply answer a few questions, and then sign and invite others to sign online. You can save your progress, download, and print anytime too. Rocket Lawyer also offers other POA forms, including special POA and general POA.
Along with creating a will, FreeWill lets you draft a durable financial power of attorney. It takes only 20 minutes to fill out the information online, and then you're provided with a printable form and instructions for authorizing it according to your state's laws.
With Gentreo, you can draft a wide range of estate-planning documents online. Create a power of attorney, as well as a will, living trust, health-care proxy, and pet documents. Store copies on Gentreo's website, and choose who has access to your documents. Membership prices start at $100 for the first year and then drop to $50 for every following year.
Frequently Asked Questions About Power of Attorney
- Does a power of attorney need to be notarized?
It depends on the state, since each state has its own rules for validating a power of attorney. Some require two witnesses and no notary, some require two witnesses or a notary, and a smaller number require two witnesses and a notary.3
- How much does a power of attorney cost?
The cost for a power of attorney varies, depending on how you obtain the form and your state’s notary requirements. Online forms may be free, and you pay only the cost of the notary if one is needed.
- How many people can be listed on a power of attorney?
You can name multiple agents on your power of attorney, but you will need to specify how the agents should carry out their shared or separate duties.
- What are the requirements to be a power of attorney agent?
Legally, an agent must be at least 18 years old and of sound mind.4 You should also choose someone you trust to act in your best interests.
- When should I create a power of attorney?
You can create a power of attorney at any point after you turn 18. You need to create a power of attorney while you’re of sound mind.