How a Power of Attorney Works

What Is a Power of Attorney

A power of attorney is a legal instrument that grants another person the authority to act as your legal representative, and to make binding legal and financial decisions on your behalf.

While it is not particularly difficult to find power of attorney forms on the Internet, there is usually little or no accompanying explanation of what a power of attorney is, when you need one, or what type to choose. Given that the power of attorney can grant considerable power to a third party to act on your behalf and sign your name to legal contracts, you should give careful consideration to the person to whom you choose to grant those powers, and whether any limits should be imposed in the time the power of attorney will last, or in its scope.

Types of Power of Attorney

At a basic level, there are two types of powers of attorney.

  • General Power of Attorney - A general power of attorney is unlimited in scope and duration, and permits the named individual to act as your legal representative in relation to financial matters until such time as it is revoked.

  • Specific Power of Attorney - A specific or limited power of attorney imposes limits upon the named representative, and may restrict the scope of that person's powers to a single type of conduct or a single transaction. For example, the person could be granted the power to engage in financial transactions from a specific checking account, or to sign the closing documents for a specific real estate transaction.

Either type of power of attorney may be limited in its duration. That is, the document can specify a date or event after which the power of attorney will no longer be valid.

Ordinarily, power of attorney forms do not have to be registered with the state. However, if a power of attorney grants somebody the right to engage in transactions relating to real estate, it may be necessary to record the form in order for it to be effective.

Appointing Multiple or Alternate Representatives

When executing a power of attorney, you may choose to appoint more than one person to act on your behalf.

  • You may require that all persons appointed as your agents jointly sign any instrument or document in order for it to be binding upon you; or

  • You may permit each agent to act individually on your behalf.

Due to the difficulties that can arise from conflict between representatives or from obtaining multiple signatures, under most circumstances lawyers will recommend appointing a single representative.

For a power of attorney with a longer duration, or for a durable power of attorney, it makes sense to designate an alternative representative (or a series of successors), who will be empowered to act in the event that the first person you named dies, becomes disabled, or no longer wants to act as your representative.

When Does a Power of Attorney Become Effective

A power of attorney may be made effective based upon your specific needs. A power of attorney may be made effective:

  • At the time it is signed;

  • At a future date described within the document,

  • Upon the occurrence of a specific future event; or

  • Upon the occurrence of a contingency (such as your becoming disabled).

Terminating a Power of Attorney

As long as you remain competent to manage your own legal affairs, you may terminate any power of attorney that you have previously executed. To the extent possible, you should collect and destroy the original powers of attorney and any copies, so as to avoid confusion or misrepresentation at a later date.

Planning for Medical Disability

The greatest need for a power of attorney -- the need most people have and many neglect -- is the healthcare proxy, a medical power of attorney that is created in anticipation of a medical emergency or disability. A medical power of attorney allows you to choose in advance who will represent your interests in the event that you become incapacitated due to an illness, accident, or other disorder.

When you create a medical power of attorney, you may impose upon your agent any restrictions that you choose. You may make clear, for example, that the person is not authorized to override your living will, an instrument that limits the right of doctors and hospitals to resuscitate you or to utilize invasive life support to keep you alive. Conversely, you can instruct your agent to authorize any and all life-extending care that your doctors are willing to provide.

What Happens if You Don't Have a Healthcare Proxy

If you do not have a medical power of attorney, in the event of incapacity your loved ones may be forced to seek a court order to appoint a person, usually called a guardian, who will be authorized to oversee your medical care, where you receive your care, and to enforce your wishes in relation to your care. If you are unable to express your wishes to a court, the court may not appoint the person you would have preferred to advocate for your healthcare needs, and may not be willing or able to accept the representations of your loved ones as to your stated preferences for your care and treatment.

Although it can be uncomfortable to address the prospect of serious health issues and end-of-life care with your loved ones, it is better to do so in advance of a crisis rather than forcing them to go through a court process at what will already be an extremely difficult time.

Executing a Durable Power of Attorney

Most people who engage in estate planning in anticipation of possible disability obtain both a medical power of attorney and a durable power of attorney, a document that enables a trusted loved one to oversee their finances while they are incapacitated. In the event of a longer-term disability, having a duly authorized legal representative who can manage your bank accounts, process any income or insurance proceeds, and pay your bills, will almost always be necessary.

As with the medical power of attorney, if you neglect to plan in advance it is likely that a court will have to appoint somebody to represent your interests. This person, generally called a conservator, may not be the person you would have chosen, and may in fact be a private individual who works at a significant hourly fee, paid out of your estate. Once again, it makes sense to plan in advance.

Where to Get Power of Attorney Forms

Free Power of Attorney Forms:

We offer the following example power of attorney forms:

Additional Sources of Forms:

Additional options for executing a healthcare proxy and durable power of attorney include:

  • Self-Help - You may obtain power of attorney forms from self-help websites and books, often for free. You will need to decide which forms will suit your purposes, edit them, and properly execute the forms;

  • Estate Planning Lawyers - Most attorneys who create a general estate plan will help you execute powers of attorney as a part of that plan;

  • Hospitals - If you do not want to utilize an attorney to draft an estate plan and are content to use a prepared, standard form, you can almost always obtain free power of attorney forms from a hospital. Most hospitals offer standard power of attorney forms, and may even provide notary services to assist with their execution, because it can save them a great deal of difficulty if people issue these authorizations when they are healthy and competent, as opposed to requiring one of their administrators to guide family members through the process of petitioning a court for the appointment of a guardian or conservator, potentially delaying important medical decisions and treatment.

Please note that powers of attorney issued for the purpose of managing your assets in the event of disability are almost always unlimited in duration, that is, they are "durable" powers of attorney. Many financial institutions are reluctant to accept or rely upon powers of attorney which expire after a specific date, and some will refuse to accept them. If you are interested in limiting the duration of a power of attorney which takes effect in the event of disability, it makes sense to check with an attorney in your state to see what effect such a limit will have. Also, you may wish to limit any power of attorney of this type, such that it expressly recognizes your right to participate in medical and financial decisions, to the extent that you are able.

Copyright © 2003 Aaron Larson, All rights reserved. No portion of this article may be reproduced without the express written permission of the copyright holder. If you use a quotation, excerpt or paraphrase of this article, except as otherwise authorized in writing by the author of the article you must cite this article as a source for your work and include a link back to the original article from any online materials that incorporate or are derived from the content of this article.

This article was last reviewed or amended on Aug 18, 2016.