Skip to main content

What is a power of attorney (POA)?

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

Powers of attorney can be helpful to older people and others who want to choose a trusted person to act when they cannot. Creating a POA is a private way to appoint a substitute decision-maker and is relatively inexpensive, although it may involve help from a lawyer. If you don’t create a POA in advance, a friend or family member might have to go to court to have a guardian appointed – and that process can be lengthy, expensive, and very public.

A financial POA can be used as a tool for planning for future incapacity – an inability to make financial decisions due, for example, to dementia, traumatic brain injury, or some other impairment that affects mental function. When used for advance planning, a POA generally is “durable,” meaning it continues to be effective even if the person creating it becomes incapacitated.

A financial POA can also be used for short-term purposes: for example, if a servicemember is deployed overseas, he or she may create a POA so someone can pay bills, sell property, or handle other business in his or her absence.

However, a POA does involve some risk. It gives someone else – your agent – a great deal of authority over your finances without regular oversight.

POA abuse can take many forms:

  • The POA document itself may be a forgery
  • Your agent might pressure you for authority that you do not want to grant
  • Your agent may spend your money on himself rather than for your benefit
  • Your agent might do things you didn’t authorize him to do – for example, make gifts or change beneficiaries on insurance policies or retirement plans

Many states have laws in place to allow your agent to act appropriately on your behalf and to prevent POA abuse. To find out more about legal services in your state, contact your area agency on aging .

Protect against POA abuse by doing the following:

  • Trust, but verify. Only appoint someone you really trust and make sure they know your wishes and preferences. You can require in your POA that your agent regularly report to another person on the financial transactions he or she makes on your behalf.
  • Tell other friends, family members, and financial advisers about your POA so they can look out for you.
  • Remember 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 (cancel) your POA.
  • Beware 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.