Designating a Power of Attorney (POA) can be an essential and productive tool for managing your financial and other interests. However, the term also causes confusion, partly because there are different varieties of POAs and partly because various jurisdictions use different definitions and procedures.
Some variations include the breadth of responsibility, the timing of the authority, and the duration. If you are working to establish a power of attorney relationship, the key takeaway is to be cautious and thorough in your planning and documentation.
While the phrase sounds like a person, it's actually a delegation of responsibility and authority. The principal or grantor is the person who names someone else to act on their behalf, and the designee is the selected agent. The person granted this authority does not need to be (and typically is not) an attorney.
In each case, the assignment of a Power of Attorney is executed with a form that is notarized and recorded. The POA should indicate the shared responsibilities, the trigger, if applicable, and the duration. There is a uniform version of the POA that many states have adopted, but others retain individual requirements and procedures.
A POA can be broad, including the authority to buy and sell assets and real estate, pay bills, buy insurance, and similar transactions. In some cases, you might designate a POA for someone you work with to make it simpler to get things done on your behalf. However, a POA agent may not transfer your assets or funds to themselves, and they are required to uphold a fiduciary standard.
In other cases, a POA could be limited to a specific transaction or period. For example, suppose you plan to travel to a remote location or otherwise be unavailable temporarily. Your agent can handle routine or urgent matters in your absence with a General POA.
One well-known type of POA is a healthcare POA, sometimes called a healthcare proxy. These directives assign the agent oversight of the principal's care if they cannot make their own decisions. Often, a healthcare POA is a springing power triggered by the grantor's incapacitation. However, other types of POA can also be springing or may take effect immediately. The details are included in the description of the authority being granted.
Often, the person you choose for a healthcare power of attorney differs from the person you might designate as your financial or business agent. Sometimes the POA is granted to a family member or close friend when the issues are medical. In most states, a healthcare power of attorney must be supplemented by a medical directive that explains the grantor's preferences regarding medical care, end-of-life treatments, and related concerns.
If you designate a durable power of attorney, you may revoke or change the designee at any time - as long as you are still mentally competent to do so. A durable power of attorney is intended to remain active until the principal passes away. A durable POA can be effective immediately or have a springing provision that activates it if something happens to render the principal incompetent.