Our Parents
Senior Health
Senior Living Options
Finances & Legal
Products for Seniors
About Us
A brown banner with the OurParents logo

Power of Attorney: What Is It and How Do You Create One?

Written by Grace Styron
 about the author
10 minute readLast updated April 27, 2023
Reviewed by Denise LettauAttorney Denise Lettau has over 15 years of experience in the wealth management industry.

We could all use a bit of help sometimes. If your parent has found themselves struggling to stay on top of their finances or personal affairs, one way they can get significant help is by appointing a power of attorney. Whether they’ve had an accident and need temporary assistance managing finances, or they’ve decided they’ll need long-term assistance down the road, having a power of attorney in place can help ensure their ultimate wishes are prioritized. Learn about the different types of power of attorney, how they work, and what they can do for your loved one in a time of need.

Key Takeaways

  1. A power of attorney is a binding legal document. It gives someone else the authority to make certain financial, legal, or medical decisions on your loved one’s behalf.
  2. There are different types of power of attorney. Legal requirements vary from state to state, but most can be tailored to meet your loved one’s needs.
  3. Your parent should completely trust the agent they appoint as a power of attorney. The agent will have the authority to manage important aspects of your parent’s life.
  4. It’s best to have a lawyer draft a power of attorney document. Although forms are available online, having a lawyer create the document can help families avoid issues down the road.

What is a power of attorney (POA)?

A power of attorney is a binding legal document that gives a person or institution the authority to manage personal or financial matters on your parent’s behalf in the event that they’re unable to.
As one of the most important documents a senior can have, a POA ensures that your parent’s wishes will be prioritized should they ever become incapacitated.

Why would someone need a power of attorney?

There are a number of reasons an aging relative may end up needing a POA. Some examples can include the following:
  • They struggle to manage their affairs on their own.
  • They’ve received a concerning or terminal diagnosis that may hinder their ability to make informed decisions.
  • Their relationships with family members are poor or unstable, so they want to designate someone unrelated whom they can trust to manage their life wishes.
  • They plan to travel during retirement, and they want to designate someone at home to manage activities like cashing checks or paying bills.

How does a power of attorney (POA) work?

In short, a power of attorney document creates a legal relationship between a person (called the principal) and a trusted individual they appoint to act on their behalf (called the agent or attorney-in-fact). Requirements for executing a valid POA vary by state, but once it is in effect, the agent has full authority to act on the principal’s behalf.
Typically, a bank account is one of the first things people want protected, so your loved one should check with their financial institutions as to their requirements. Many banks require a specific POA form in addition to anything drafted by the client’s attorney.

What are the limits of a power of attorney?

An agent cannot break their duty to act in the principal’s best interest or exercise powers beyond those defined in the document, which the principal can stipulate. The agent is expected to always act in the principal’s best interest throughout the duration of the POA agreement. They cannot ever alter the principal’s will or transfer their power to someone else without the principal’s consent. Also, an agent’s ability to act on the principal’s behalf ends after the principal has passed away.[01]

Let our care assessment guide you

Our free tool provides options, advice, and next steps based on your unique situation.

What are the different types of power of attorney (POA)?

It’s important to understand the different types of power of attorney to ensure the document fits the principal’s needs. Keep in mind that legal requirements can vary from state to state.
Your loved one can consult an estate planning attorney or elder law attorney for guidance on drafting POA documents for their unique situation.

Health care power of attorney

Also known as a medical POA, a health care POA gives the agent authority to make solely medically related decisions for the principal. The agent’s job in this case is to make sure the principal’s health care wishes are upheld, often through the end of life.
An agent with medical POA may be able to dictate the following on the principal’s behalf:
  • The type of medical care the principal receives, such as surgeries or drug treatment, and from which doctors or care providers
  • Whether the principal should receive care in their own home or be transferred to a hospital or senior care facility, such as a memory care home or nursing home
  • How aggressively to treat certain diseases
  • Release of medical records [02]

Financial power of attorney

A financial POA gives the agent authority to make a range of legal and financial decisions for the principal.
The agent may be granted the power to do the following on the principal’s behalf:
  • Manage their bank accounts and transactions
  • Pay bills and make investment decisions
  • Access their bank accounts to pay for things like medical care and housing
  • File their taxes
  • Collect debts
  • Buy and sell property, real estate, and stocks
  • Apply for public benefits such as Medicaid or veterans benefits [03]
A regular financial POA is a great option for those who need help now. It takes effect immediately, but it’s nondurable. That means it’s null once the principal becomes mentally incapacitated or disabled, unable to make their own informed decisions, or incapable of communicating their decisions for any reason. This is usually when an aging loved one needs an advocate most. If you think these things may be a concern for your loved one, look into a durable POA instead.

Durable power of attorney

A durable power of attorney also allows the agent to immediately assist with medical and/or financial decisions on the principal’s behalf, which is often necessary following a diagnosis like dementia or a medical emergency. The difference is that tthe agent’s authority under a durable POA is still valid and will remain in effect, even if the principal is physically or mentally incapacitated.[03]

Springing power of attorney

This is a type of POA that only takes effect in certain circumstances, which can and should be clearly specified in the document. A springing POA is a great option if your parent is healthy and wants to manage their own affairs for as long as possible. The POA will only “spring” into effect once the criteria set forth in the document are met (usually when a physician certifies the principal is incapacitated). The agent would then acquire power over most of the principal’s finances, although the principal can set some limits if they choose to.[03]
Note, though, that this process is regulated on a state level. Some states have actually eliminated the springing clause because of discrepancies around the definition of the word “incapacitated.” For example, maybe the principal doesn’t recognize that they have memory problems. Maybe the agent believes the principal is incapacitated, but the principal’s doctor disagrees. Or perhaps there are delays in getting a doctor’s written certification that the principal’s condition is impaired. Depending on the state you live in and what’s stated in the POA, gray areas like these can sometimes make getting help through a springing POA very difficult.

Limited power of attorney

Under a limited POA, the agent only has the authority to act on specific activities outlined in the POA document. Your loved one may want to limit their agent’s powers for a number of reasons. Maybe they only have one or two specific transactions they need help with, or maybe they were involved in an accident and only need a POA agent’s temporary help while they recover.

How to set up a power of attorney

You can find power of attorney forms online, but it’s generally best to have a lawyer customize documents for the principal and their agent. Although it’s not always required, getting good legal advice before executing a POA is critical to help ensure it suits your loved one’s needs and conforms to state requirements.

Ensuring the power of attorney is effective

Your parent must prepare a POA and other legal documents while they’re still of sound mind. For example, if your loved one has just received a concerning diagnosis, they should start setting up a POA before the condition progresses.
In some cases, a POA document may not be considered binding if your parent signs while their competency can be called into question. If they become incapacitated before drafting POA documents, you and/or your family members may face a complicated and expensive legal process to seek conservatorship or guardianship.
To ensure a POA is effective, the following should take place:
  • The principal must be mentally competent.
  • The POA must be signed by the principal. Depending on the state, one or two other witnesses may also need to sign, and notarization me be necessary.
  • The document should be properly formatted and in writing.
  • All parties and powers should be clearly identified and defined in the POA, along with any limitations or restrictions.
  • The document’s durability should be clearly specified.
  • Both the agent and the principal should read and understand what powers and responsibilities are given by the POA.
  • Although it’s not always legally required, it’s best to record the POA for documentation purposes. Some states also require certain POAs to be filed in court before they’re considered valid.[04]

Talk with a Senior Care Advisor

Our advisors help 300,000 families each year find the right senior care for their loved ones.

How to select a POA agent 

Some people mistakenly believe that they have to choose a lawyer to be their agent. Really, there aren’t any specific qualifications required for someone to act as an agent except that they can’t be a minor or be incapacitated.
Your parent could choose to appoint you, their spouse, another family member, a close friend, or an advisor to act on their behalf. They can even choose multiple agents and appoint each of them separate powers; however, this can sometimes cause delays.[05] If your parent needs help making their decision, suggest consulting an elder law attorney. In any case, it’s a good idea to name one or two alternative agents in case the primary agent declines to serve, becomes ill themselves, or is otherwise unable to fulfill their duties.
Ultimately, the agent can be anyone as long as they’re competent. Whoever is chosen, it’s important that they’re trustworthy and responsible enough to manage all of your loved one’s affairs, including managing their bank accounts and buying or selling property.[04]
An ideal agent may have the following qualities:
  • They’re capable of managing finances, including paying the principal’s bills and balancing their checkbook while also handling their own financial matters.
  • They’re organized and can manage their time well.
  • They practice good communication with everyone involved, including the principal, their family, doctors, and caregivers.
  • They can be trusted to keep the principal’s personal information private and confidential without exploiting the situation.

Ending a power of attorney

Rights granted under a power of attorney end when the principal passes away. However, depending on the type of POA that’s in effect, they could end when the principal is deemed incompetent or if there’s a predetermined expiration date. The principal also has the ability to revoke their POA at any time as long as they’re still competent to do so.

Revoking power of attorney

Unfortunately, a power of attorney can run the risk of being too broad or not broad enough, which can lead the agent to mismanage or even abuse their authority. There’s also very little oversight of an agent’s actions because POA is governed by a contract and not by a court.
If for any reason the principal wants to revoke their agent’s power, they can do so by filling out and executing a revocation form. To make the revocation fully effective, the principal would also typically need to notify and provide a copy of the form to the agent and any other parties relying on the POA.
POA revocation forms can be found online, but, as always, it’s best to consult a lawyer before executing the document.

Need help determining your family’s next steps?

Navigating care for your parent as they age is tough, but know that you don’t have to do it alone. If you think you could benefit from some extra support, consider reaching out. Our Senior Care Advisors can offer information regarding your parent’s care options, such as in-home care, assisted living, and memory care.


  1. Hicks, P. (2022, January 20). Power of attorney rights and limitations – What you need to know. Trust & Will.

  2. Rains, S. C. (2017, March 31).Pick the right power of attorney instrument. American Bar Association.

  3. American Bar Association. Power of attorney.

Meet the Author
Grace Styron

Grace Styron is a writer at OurParents specializing in assistive technology, memory care, and home care. Before writing about healthy aging, she worked for an online women’s lifestyle magazine and as a grant writer for a nonprofit regenerative permaculture farm in Virginia. She earned her bachelor’s degree from Missouri State University.

Edited byDanny Szlauderbach
Reviewed byDenise Lettau

The information contained in this article is for informational purposes only and is not intended to constitute medical, legal or financial advice or create a professional relationship between A Place for Mom (of which OurParents is a trademark) and the reader.  Always seek the advice of your health care provider, attorney or financial advisor with respect to any particular matter and do not act or refrain from acting on the basis of anything you have read on this site.  Links to third-party websites are only for the convenience of the reader; A Place for Mom does not recommend or endorse the contents of the third-party sites.