A power of attorney lets one person make decisions on behalf of another

A power of attorney is a legal document that gives one person (called the agent or attorney-in-fact) the authority to act on behalf of another person (called the principal). The agent can make decisions about money, property, healthcare, or other matters depending on what the document says. The principal is the one who creates the power of attorney and decides what powers to grant.

The agent does not have to be a lawyer — the title "attorney-in-fact" is just the legal term for someone with this authority. The agent can be a family member, friend, or professional. What matters is that the principal trusts them and the document clearly spells out what they are allowed to do.

Key Takeaways

  • A power of attorney document must be signed by the principal and often notarized, and it only becomes valid if the principal is mentally capable of understanding what they are signing.
  • The agent's powers depend entirely on what the document says — they might handle only bank accounts, or they might make healthcare decisions, or both, depending on the principal's wishes.
  • A durable power of attorney stays in effect even if the principal becomes mentally incapacitated, while a regular power of attorney ends if the principal loses mental capacity.
  • The principal can revoke (cancel) a power of attorney at any time as long as they are mentally capable, and they should notify the agent and any institutions in writing.
  • An agent has a legal duty to act in the principal's best interest and keep accurate records of what they do with the principal's money or property.

Financial powers an agent can have

An agent with financial authority can manage bank accounts, pay bills, sell property, manage investments, file tax returns, and handle insurance claims — but only the specific powers listed in the document. If the document says the agent can access checking and savings accounts, that does not automatically mean they can sell the principal's house. The principal decides which financial tasks to include.

The agent must keep records of all transactions and spend money only for the principal's benefit or as the principal directs. If the principal becomes incapacitated and the power of attorney is not durable, the agent's authority ends when ready, and no one can manage finances unless a court appoints a guardian or conservator — a slower and more expensive process.

Healthcare and medical decisions

A healthcare power of attorney (sometimes called a healthcare proxy or medical power of attorney) lets an agent make medical decisions if the principal cannot. This includes choosing doctors, approving treatments, deciding about surgery, and making end-of-life decisions like whether to use life support. The agent must follow the principal's wishes as stated in the document or as they know them from conversations.

Healthcare powers are separate from financial powers. A principal can give one person authority over money and a different person authority over medical care. The document should be as specific as possible about what medical decisions the agent can make, especially for sensitive choices like organ donation or life-sustaining treatment.

What an agent cannot do

An agent cannot change the principal's will, make decisions after the principal dies, or act outside the powers granted in the document. They cannot use the principal's money for their own benefit unless the document specifically allows it. They cannot make decisions the principal forbids, and they cannot ignore instructions the principal gave them in writing.

An agent also cannot delegate their authority to someone else unless the document says they can. If the principal wants two people to share decision-making, the document must name both of them. An agent who violates these rules can be sued by the principal or by family members, and they can be removed from their role.

Durable versus non-durable powers of attorney

A durable power of attorney stays in effect even if the principal becomes mentally incapacitated or unable to make decisions. This is the type most people use because it provides protection if they develop dementia, have a stroke, or fall into a coma. The document must include language stating that it is durable — usually a phrase like "this power of attorney shall not be affected by the principal's subsequent incapacity."

A non-durable power of attorney ends automatically if the principal loses mental capacity. This type is useful for temporary situations — for example, if someone is having surgery and wants their spouse to handle bills while they recover. Once they are well enough to manage their own affairs, the power of attorney ends. If the principal becomes incapacitated before revoking it, the document becomes invalid, and the family may have to go to court to manage the principal's finances.

How to create a power of attorney

The principal must sign the power of attorney document while they are mentally capable of understanding what they are signing. Most states require the signature to be notarized (witnessed and certified by a notary public). Some states have specific forms or language requirements, so checking your state's rules or using a template from your state bar association is important.

The principal should give copies to the agent, their doctor, their bank, and any other institution that might need to see it. Keeping the original in a safe place — like a safe deposit box or with an attorney — is wise. The principal should also tell trusted family members where the document is kept so it can be found if needed.

When an agent's authority ends

The principal can revoke a power of attorney at any time as long as they are mentally capable. They should notify the agent in writing and send written notice to any banks, healthcare providers, or other institutions that have a copy. Destroying the original document is not enough — institutions may still honor an old copy unless they receive formal notice of revocation.

A power of attorney also ends when the principal dies. After death, the agent has no authority, and the principal's estate is handled through probate or according to the will. If the principal never created a will and did not name an agent, the state decides who manages the estate, which can take months or years and cost more money.

Frequently Asked Questions

Can an agent use the principal's money for themselves?

No, unless the power of attorney document specifically allows it. An agent must use the principal's money only for the principal's benefit or as the principal directs. If an agent spends money on themselves without permission, they can be sued and forced to repay it, and they can be removed from their role.

What happens if the principal and agent disagree about a decision?

The principal is in control. If they are mentally capable, they can override the agent's decision, give new instructions, or revoke the power of attorney entirely. If the principal is incapacitated and cannot communicate, the agent must follow the instructions in the document or the principal's known wishes. Family members who believe the agent is acting wrongly can ask a court to intervene.

Does a power of attorney work in other states?

Most states recognize powers of attorney from other states, but some have specific requirements. If the principal owns property in another state or plans to move, it is worth checking that state's rules or creating a separate power of attorney for that state. Banks and healthcare providers sometimes ask for a power of attorney created in their own state.

Can someone challenge a power of attorney after the principal dies?

Yes. Family members can challenge whether the document was signed properly, whether the principal was mentally capable when they signed it, or whether the agent acted wrongly. These challenges usually happen during probate. Having the document notarized and keeping a record of the principal's mental state at the time of signing makes challenges harder to win.

What is the difference between a power of attorney and a guardianship?

A power of attorney is created by the principal while they are still capable. A guardianship is ordered by a court when someone is already incapacitated and has no power of attorney in place. Guardianship is more expensive, takes longer, and gives the court more control over decisions. A durable power of attorney prevents the need for guardianship.