What is a Power of Attorney and Why Do You Need One?

When planning for the future, many people focus on what happens after they pass away. Equally important is planning for what happens if you become unable to make decisions for yourself during your lifetime. That’s where a power of attorney (POA) comes in.

A power of attorney is a legal document that allows someone else to act on your behalf. Depending on how it’s set up, a POA can grant someone authority to manage healthcare decisions or handle other important matters if you are unable to do so yourself.

Types of Power of Attorney

Not all POAs are the same. In fact, there are several types, each designed for different purposes. Here are the most common ones.

General Power of Attorney
This gives your agent broad powers to act on your behalf, including managing bank accounts, signing documents, paying bills, and handling business or legal affairs. It typically ends if you become mentally incapacitated or die, unless it’s made durable.

Durable Power of Attorney
A durable POA stays in effect even if you become mentally incapacitated. This is one of the most important estate planning tools, as it ensures someone can step in and manage your affairs if you’re no longer able to make decisions.

Limited or Special Power of Attorney
This is used to give someone authority over a specific task or for a limited time. For example, if you’re out of the country and need someone to sign a document on your behalf, you can create a POA just for that purpose.

Medical or Healthcare Power of Attorney
Also called an advance directive, this document allows your agent to make medical decisions for you if you’re incapacitated. This includes decisions about surgery, medication, end-of-life care, and more.

Why You Need a Power of Attorney

Some people assume they don’t need a POA until they’re older or facing a serious illness. The truth is anyone, at any age, can face unexpected accidents, illnesses, or other circumstances that leave them unable to manage their own affairs. Without a POA in place, your loved ones may face costly and time-consuming court proceedings to gain authority to help you.

Here are a few key reasons why having a power of attorney is so important.

Avoid Court Intervention
If you become incapacitated and haven’t named someone to act on your behalf, your family may have to go through a court process to be appointed as your legal guardian or conservator. This process is not only expensive and public, but it also takes time, which can be critical in an emergency. A POA avoids this by letting you choose your agent in advance.

Protect Your Finances
Without someone to manage your financial affairs, bills can go unpaid, investments can be neglected, and your financial stability can be at risk. A financial POA ensures that someone you trust can step in quickly to handle these matters.

Ensure Your Healthcare Wishes Are Followed
With a medical POA, you can choose someone who understands your values and preferences to make decisions on your behalf. This is especially important if you’re unable to communicate or if your loved ones disagree about what kind of care you should receive.

Plan for Peace of Mind
Creating a POA gives you peace of mind knowing that someone you trust will be in charge if something happens. It also relieves stress for your loved ones, who won’t have to guess what you would have wanted or struggle to navigate the situation.

Choosing the Right Agent

Your agent should be someone you trust completely. This means somebody who’s responsible, reliable, and willing to act in your best interest. This could be a spouse, adult child, close friend, or professional advisor. Make sure to talk to the person before naming them to confirm they’re comfortable with the role.

In some cases, it’s a good idea to name an alternate agent in case your first choice is unable or unwilling to serve when the time comes.

When Does a Power of Attorney Take Effect?

You can choose when your POA becomes effective. Some are effective immediately upon signing, while others are “springing” POAs that only take effect if and when you become incapacitated. There are pros and cons to both options, and an attorney can help you decide what’s best for your situation.

Can a Power of Attorney be Changed or Revoked?

Yes. As long as you’re mentally competent, you can revoke or update your power of attorney at any time. This allows you to change your agent, update their powers, or cancel the document entirely. It’s a good idea to review your POA periodically to make sure it still reflects your wishes and that your chosen agent is still the right person for the job.

Power of Attorney vs. Guardianship
A common question people ask is, “What will happen if I don't have a POA?” In that case, your loved ones might have to petition the court to be appointed as your guardian or conservator. This process is not only more expensive and time-consuming, but it also removes your ability to choose who manages your affairs. With a POA, you stay in control by making those changes ahead of time.

A Critical Piece of Your Estate Plan

A power of attorney is more than just a form. It’s an essential part of any complete estate plan. Along with a will, trust, and healthcare directive, a POA helps ensure that your wishes are respected and your affairs are handled smoothly, no matter what life throws your way.

Even if you already have other estate planning documents in place, without a POA, there may be gaps that could cause problems later. Think of it as one more way to protect yourself and your loved ones from uncertainty and unnecessary hardship.