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What Can a Power of Attorney Do? (Simple Checklist)
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Get StartedWhat Can a Power of Attorney Do?
A power of attorney (POA) is like giving someone a key to act on your behalf. Think of it as your backup plan when life throws you a curveball. Your chosen person, called an agent or attorney-in-fact, can step in and handle important decisions for you.
But what exactly can they do? Let's break it down in simple terms so you know what you're signing up for. This document becomes especially crucial as part of comprehensive estate planning, working alongside other essential documents to protect your interests.
Financial Powers: Managing Your Money
A financial power of attorney gives your agent broad control over your money matters. Here's what they can typically do:
Banking and Accounts
- Access your bank accounts and credit unions
- Write checks and make deposits
- Transfer money between accounts
- Close or open new accounts
- Monitor account activity and statements
Bill Payment and Daily Finances
- Pay your monthly bills like utilities and mortgage
- Handle credit card payments
- Manage loan payments
- Deal with tax obligations
- Cash checks made out to you
Your agent can essentially become your financial representative in every meaningful way. They can negotiate with creditors on your behalf, set up payment plans if you're facing financial difficulties, and even make investment decisions that align with your previously stated goals and risk tolerance.
Investment and Retirement Accounts
- Manage your investment portfolio
- Buy or sell stocks and bonds
- Access retirement accounts like 401(k)s and IRAs
- Make investment decisions
- Roll over retirement funds
Real Estate Transactions
- Buy or sell your property
- Refinance your mortgage
- Handle rental property management
- Sign real estate contracts
- Manage property taxes
Real estate transactions can be particularly complex and time-sensitive. Your agent can attend closings, negotiate repairs after home inspections, and even make decisions about whether to accept or counter offers on your behalf, ensuring you don't miss out on important opportunities.
Insurance Matters
- Pay insurance premiums
- File insurance claims
- Change insurance beneficiaries
- Purchase new insurance policies
- Cancel existing coverage
Healthcare Powers: Medical Decisions
A healthcare power of attorney focuses on medical decisions. This becomes crucial when you can't speak for yourself. Sometimes called an advance directive, this document ensures your medical wishes are honored even when you're unconscious or mentally incapacitated.
Treatment Decisions
- Consent to or refuse medical treatments
- Choose doctors and healthcare providers
- Decide on surgery or procedures
- Select medications and treatments
- Make end-of-life care decisions
Healthcare Management
- Access your medical records
- Choose hospitals or care facilities
- Hire or fire healthcare staff
- Make decisions about mental health treatment
- Handle healthcare insurance claims
Healthcare decisions often require quick action. Your agent might need to authorize emergency surgery, choose between treatment options with different risk profiles, or decide whether to move you to a specialized facility for better care.
Legal and Administrative Powers
Your agent can also handle various legal and administrative tasks that keep your life running smoothly. These powers become especially important during extended incapacity periods.
Legal Matters
- Sign legal documents on your behalf
- Hire attorneys if needed
- Handle lawsuits or legal disputes
- Manage contracts and agreements
- Deal with government agencies
Personal Affairs
- Access safe deposit boxes
- Manage digital accounts and passwords
- Handle mail and correspondence
- Manage personal property
- Make gift transactions within limits
Digital asset management has become increasingly important in our connected world. Your agent can maintain your online presence, manage digital subscriptions, and ensure important emails don't go unnoticed during your incapacity.
What a Power of Attorney CANNOT Do
It's important to understand the limits. Your agent cannot:
- Change your will or create a new one
- Act after your death (POA ends when you die)
- Transfer powers to someone else
- Make decisions that go against your clearly stated wishes
- Use your assets for their own benefit
- Make gifts beyond what you've specifically allowed
Unlike situations where you die without proper planning, a power of attorney specifically ends at death. At that point, your executor or personal representative takes over to handle your estate according to your will's instructions.
Types of Power: When They Kick In
Not all powers of attorney work the same way. Here's when they become active:
Immediate Power of Attorney
This starts working right away, even while you're perfectly capable. Think of it as convenience planning. Maybe you're traveling abroad and need someone to handle a real estate closing back home. Or perhaps you're a busy executive who wants a trusted family member to handle routine financial tasks.
Springing Power of Attorney
This only kicks in when you become incapacitated. A doctor usually needs to certify that you can't make decisions yourself. It's like a safety net that only opens when you need it. However, the activation process can sometimes cause delays when quick action is needed.
Choosing Your Agent Wisely
Your agent will have significant power over your life. Choose someone who:
- You trust completely
- Lives reasonably close to you
- Understands your values and wishes
- Has good judgment and organizational skills
- Can handle financial and legal matters
Consider their availability during emergencies. A successful but constantly traveling businessperson might not be the best choice, even if you trust them completely. You want someone who can act quickly when situations arise.
Protecting Yourself
While giving someone power of attorney involves trust, you can build in safeguards:
- Name a backup agent in case your first choice can't serve
- Require regular accounting of financial decisions
- Limit specific powers if you're concerned
- Include instructions about your preferences
- Review and update the document regularly
Some people require their agent to get permission from another family member for major financial decisions. Others set dollar limits on transactions that can be made without additional oversight. These guardrails help prevent abuse while still giving your agent the flexibility to act in emergencies.
Coordinating with Other Estate Planning Documents
Your power of attorney should work seamlessly with your other planning documents. If you have a living trust, make sure your agent knows about it and can coordinate with your trustee if needed. Your healthcare power of attorney should align with any specific medical wishes you've documented elsewhere.
Regular updates become crucial as your life circumstances change. Marriage, divorce, births, deaths, and geographic moves all impact who should serve as your agent and what powers they need.
Getting Started
Creating a power of attorney doesn't have to be complicated, but it needs to be done right. Each state has different requirements for making it legal. Some require notarization, others need witnesses, and a few states require both.
Consider working with an estate planning attorney to make sure your document covers everything you need. They can help you customize the powers based on your specific situation and make sure it meets your state's legal requirements. The cost of professional help is minimal compared to the potential problems of having an invalid or incomplete document.
The Bottom Line
A power of attorney is one of the most important documents you can have. It ensures someone you trust can step in and handle your affairs when you can't. Whether it's a medical emergency, cognitive decline, or just being out of the country, having the right person with the right powers can make all the difference.
Don't wait until you need it. Set up your power of attorney while you're healthy and thinking clearly. Your future self will thank you, and your family will have one less thing to worry about during already stressful times.
