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What is a power of attorney (POA)?

A power of attorney is a legal document that allows someone else to act on your behalf.

A power of attorney can be helpful to older people and others who want to choose a trusted person to act on their behalf when they cannot. You can plan ahead by creating a power of attorney to appoint a substitute decision-maker, also called an agent.

If you don’t create a power of attorney in advance, a friend or family member might have to go to court to have a guardian appointed if you become incapacitated and are no longer able to make decisions for yourself – and that process can be lengthy, expensive, and very public.

What are some situations when I might need a financial power of attorney?

A financial POA can be used as a tool to help plan for the future, including the possibility that you’ll be unable to make important financial decisions due to dementia, traumatic brain injury, or another impairment that could affect your mental function. When used for advance planning, a POA generally is “durable,” meaning it continues to be effective even if you become incapacitated.

A financial POA can also be used for short-term purposes. For example, a servicemember being deployed overseas can create a POA so someone can pay bills, sell property, or handle other business in their absence.

Protect against power-of-attorney abuse

A POA involves some risk. It gives someone else a great deal of authority over your finances without regular oversight.

A POA can be complicated, so working with a lawyer could help protect you against potential abuses. Getting help from a lawyer to name an agent under a POA is relatively inexpensive. If you’re unable to afford a lawyer, you may be able to take advantage of free legal aid programs .

POA abuse can take many forms:

  • Your agent might pressure you for authority that you do not want to grant.
  • Your agent may spend your money on themself rather than for your benefit.
  • Your agent might do things you didn’t authorize them to do – for example, make gifts or change beneficiaries on insurance policies or retirement plans.

Protect against POA abuse by:

  • Telling other friends, family members, and financial advisers about your POA so they can look out for you—and even spot a forged POA document.
  • Only appointing someone you really trust and make sure they know your wishes and preferences. In your POA, you can require that your agent regularly report to another person on the financial transactions they make on your behalf.
  • Remembering that POA designations are not written in stone – you can change them. If you decide that your agent isn’t the best person to handle your finances, you can revoke or cancel your POA.
  • Being aware of someone who wants to help you out by handling your finances and be your new “best friend.” If an offer of help seems too good to be true, it probably is.

Many states have laws in place to help protect against POA abuse by helping to ensure your agent acts appropriately and on your behalf.

Learn more about financial caregivers.