What Is a Power of Attorney?

A power of attorney (POA) is a simple document that gives someone you trust the power to act on your behalf. The person you allow to step into your shoes is called an "attorney-in-fact"—or "agent," in some states. The term "attorney-in-fact" makes the role sound complicated, but an attorney-in-fact or agent doesn't need to be an actual attorney at all; you can name your spouse, child, sibling, friend, or anyone else you trust to manage your financial or health care matters.

What Type of POA Should I Make?

Power of attorneys can address a variety of situations. You can create a POA for a single transaction (for example, authorizing your brother to sell your car for you while you're out of town) or a long-term, "durable" one that will allow someone to handle your financial or health matters if you ever become incapacitated.

Durable POA

It's a good idea for pretty much anyone, regardless of age or circumstance, to create a durable POA—meaning a POA that remains in effect even if you become incapacitated. It's a way of being prepared for eventualities, hard as they might be to contemplate. In fact, most estate plans include two separate durable POAs, discussed in more detail below.

Durable POA for Finances

A financial POA gives your agent the authority to handle financial matters for you after you're no longer able to attend to these tasks. For example, your agent might use a financial POA to deposit your Social Security checks for you, file your taxes, or maintain your retirement account. See Durable Financial Power of Attorney: How It Works.

Durable POA for Health Care

A health care or medical POA allows an agent to manage your medical care. This document actually goes by many names. Your state might also call it a "health care proxy," "health care directive," "advance directive," or similar term. (To make matters even more confusing, some states combine a health care POA with a separate document called a "living will," which sets out your wishes for the type of medical treatment and end-of-life care you want to receive.) See Living Wills and Powers of Attorney for Health Care: An Overview.

Non-Durable (Limited or Special) POA

In contrast, a non-durable POA ends if you become incapacitated. This type of POA tends to be limited in scope—used for a one-time task or a finite period of time. For example, if you need your friend to handle all of your financial matters (like insurance paperwork and bank deposits) while you're recovering from surgery, you could use a non-durable POA for this purpose; this POA would essentially have an expiration date.

Springing POA

A springing POA is a power of attorney that doesn't "spring" into effect until a triggering event. Some people, particularly those who are uncomfortable with the idea of giving up control, want to use a springing durable financial POA that is effective only if they've been declared incapacitated by a third party. While this might seem attractive, a springing POA can have logistical drawbacks. (See The Problem With Springing Powers of Attorney.) The better course of action is usually to use a durable financial POA, name an agent you trust completely, and tell the agent the document is to be used only if you become incapacitated.

How Do I Choose an Agent or Attorney-in-Fact?

For a financial power of attorney, usually any competent adult can serve as your agent. This person need not be a financial expert, but certainly you'll want to choose someone who has a good dose of common sense, and whom you trust completely. In addition, consider these factors:

• Geography. If you can, choose someone who lives nearby, since some tasks (such as looking after your property, opening your mail, or going to your bank) are simply easier in person.
• Marriage. If you're married, it usually makes sense to name your spouse as your agent (to reduce conflicts between your agent and your spouse over co-owned property). If this isn't an option—for example, if your spouse is ill—then opt for someone that both you and your spouse can agree on.
• Multiple agents. In general, it's best to name just one agent, to minimize conflicts. Some financial institutions also prefer to deal with a single agent. (But it's always a good idea to name an alternate agent if you can think of someone suitable; this will put a back-up plan in place if your first-choice agent is not able to serve.)

A health care power of attorney or health care directive brings up several other considerations; see Choosing a Health Care Agent. Many states also have additional rules about who can and cannot serve as your agent (also called your health care "proxy" or "surrogate"). For example, many states do not allow your doctors or employees of your nursing home or care facility to be your agent unless they are related to you. To check your state's rules, see State Restrictions on Health Care Agents.

Once you've chosen an agent and before creating the power of attorney, make sure to talk to your agent. It might be a hard conversation—it's understandably difficult for your loved ones to contemplate a time when you are incapacitated—but you want to be certain that the person understands the responsibilities involved in being an agent and is willing to take them on.

How Do I Create a POA?

You can make your own power of attorney, but your document needs to be valid in your particular state because each state has its own set of requirements. The good news is that state-specific power of attorney forms are readily available, either from your state government or through guided software programs such as Nolo's Willmaker. When you create a power of attorney, you'll name an agent (and alternate agent, if you have one). You'll then check off or initial the specific powers that you want to give to your agent. For a financial POA, these powers might include, as just a few examples:

• Filing and paying your taxes
• Collecting benefits from Social Security, Medicare, or other government programs
• Handling transactions with banks and other financial institutions
• Managing your retirement accounts
• Buying, selling, or leasing real estate for you

For a health care POA, these powers might include, as a few examples:

• Withdrawing life-prolonging procedures when you are close to death
• Authorizing organ, tissue or body donation
• Authorizing the disposition of your remains

Signatures, Notarization, and Witnessing

To finalize your POA, you will need to sign the document. (A handful of states also requires that your agent sign the document.) Depending on your state, you'll also need to do one of the following:

• Sign the POA in front of a notary public
• Sign the POA in the presence of two witnesses, or
• Sign the POA in front of both a notary public and two witnesses.

Learn more about the financial POA laws in your state.

Putting Copies of Your POA on File

When you're done creating the POA, give your agent a copy of the document, and store the original in a safe place that your loved ones can access. If you created a financial POA that gives your agent the power to buy or sell real estate, you'll want to file a copy of the POA in the land records office of the county where you own real estate. If you created a health care POA, you should give a copy to the doctors or medical facilities most likely to be treating you.

When Does a Power of Attorney Begin and End?

If you made a durable financial power of attorney (the most common POAs made as part of an estate plan), the document usually goes into effect immediately after you've signed it and had it witnessed or notarized. In practice, of course, you can instruct your agent not to use the POA until you are incapacitated. Health care POAs, on the other hand, are usually effective upon your incapacitation.

The POA ends if you revoke the document or if you die. A few other circumstances might also invalidate your POA; for example, in some states, if you get divorced, any designation of your ex-spouse as your agent is automatically revoked.

Can You Help a Loved One Make a POA?

You can nudge or help your loved ones to create their own POA; people often find themselves helping their elderly parents with these documents. Be aware that the person you're helping must have the mental capacity to understand generally what the POA is and what it does. See Helping an Elder Make a Power of Attorney for a more in-depth discussion.