What is Power of Attorney and How to Assign it

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What is Power of Attorney and How to Assign itPower of attorney is the legal authority assigned to a person designated as an “agent” by a power of attorney document. This legal authority allows the “agent” or “attorney-in-fact” to make legal, business and even medical decisions on a “principal’s” behalf. Power of attorney is used in circumstances when a principal needs someone to make important decisions for their estate because of incapacitation, travel, or any other reason.

There are several power of attorney documents used to grant legal decision-making power in regards to medical, legal and business affairs.


What are the Differences between a Springing, Durable and Non-durable Power of Attorney?

A durable power of attorney becomes effective after it is signed, while a springing power of attorney only becomes active if the principal (the person granting the power of attorney to the agent) becomes incapacitated.

With a springing power of attorney, at the point of incapacitation the agent receives power of attorney as outlined in the document.

A non-durable power of attorney does not allow the agent to take any action in the circumstance that the principal becomes incapacitated, and this particular document typically is used for single use purposes.


How Do I Decide Whom to Assign Power of Attorney To?

The decision of who to assign power of attorney to is quite often one of the most difficult and complicated choices when arranging a financial or health care power of attorney.

The agent must not only be trustworthy, but he or she must also be unbiased and mentally capable of making what may be very complicated or difficult financial or health care decisions. Even a slight personal interest or bias can cause serious problems in the estate that can escalate out of control quickly, so the choice of should be planned by the principal carefully.

In some cases the best choice is a relative but in other cases it may not be; it completely depends on the relationship of the principal and his or her relative, and the type of power of attorney document in question (financial, health care or another type). The choice of an agent should be made after a careful evaluation of the potential agent’s ability to properly and honestly execute the financial or other matters a person’s estate.

Education is also an important part of the process, and the agent to should be familiar with the financial and business decisions that he or she may need to make in the circumstance that the principal becomes incapacitated.


How Do I Execute a Power of Attorney?

A power of attorney becomes legal once the principal has signed it, but the document may be challenged in the future even if it has been signed. It is usually best to have the document notarized, and in some states, there is a requirement of an additional signature witness. In most cases it is best to obtain legal advice regarding executing a power of attorney, because there can be complicated legal matters that arise in the future and additional preparations that may need to be made based on the state.


What Does Power of Attorney Do?

Power of attorney allows a principal to assign decision-making power to an agent for important personal and business affairs. A power of attorney document can be arranged for several different types of affairs and accomplish several purposes including the following:

  • Allowing an agent to make medical or financial decisions on a principal’s behalf
  • Keeping undesirable parties out of important business and personal decisions
  • Keeping the financial and business matters of an estate ongoing if the principal becomes incapacitated such as bill paying, business affairs, loan payments, and other matters
  • Allowing an agent to make important medical decisions based on the principal’s written preferences for medical treatment
  • Filing tax returns, managing stocks or other investments, filing for government benefits, and managing many other personal and business matters


What are the Disadvantages to a Power of Attorney Document?

Although having power of attorney documents in place can be very important to an estate plan, there are several potential disadvantages to having a power of attorney including the following:

  • The agent may not be educated on managing the financial matters of estate, resulting in mismanagement and an inefficient use of resources
  • The power of attorney document may not be recognized by financial or other institutions if it is improperly formatted or outdated, causing problems with the transfer of decision-making power to the agent
  • Not taking precautions to limit the decision-making powers outlined in the power of attorney document and granting too much power to the agent
  • Revoking power of attorney can become difficult if the agent has sent copies of the document to several different institutions.
  • If the agent ends up proving themselves untrustworthy they may commit fraud, embezzle funds from the estate, change insurance beneficiaries, and cause many other financial problems for an estate


Is There a Way to Revoke a Power of Attorney?

Power of attorney is revocable at any time by the principal, and it terminates upon the death of the principal no matter what. It can be revoked with a revocation statement, and the statement will usually require a statement of competence and other details that may vary based on the state.

The revocation statement should be sent to any parties that the agent may have contacted for the purpose of affair management. In some cases, courts will automatically invalidate power of attorney documents if the principal was deemed mentally incompetent when the document was signed.


A power of attorney is a key component of any complete estate plan, as there are many circumstances in which a person may become incapacitated and need someone else to manage important decisions. Regardless of the potential disadvantages of arranging a power of attorney, it is much better to have a trustworthy individual act as an agent rather than leaving important business and medical decisions unattended or trusting those decisions to a stranger.

At the same time, the choice of an agent should be one of the most carefully thought out estate decisions by the principal. A trustworthy and competent agent can ensure that the most important aspects of an estate continue to run even when a principal is unable to manage them.


| Your Tribute Founder

Jason Ropchan is the Founder and CEO of Your Tribute, an online resource for Funeral and Grief information and products. He has more than 15 years experience in the funeral industry developing and marketing funeral technology. He has worked with thousands of funeral homes worldwide to help them provide online memo...