A power of attorney is a document—typically prepared by a lawyer—that names someone you trust as your agent to make property, financial, and other legal decisions on your behalf. Rules about powers of attorney—including limitations on what an agent can and cannot do—vary from state to state. You can also set customized limits on what your agent is allowed to do on your behalf.
Generally, you can give your agent the ability to:
- Collect your Social Security benefits
- Use your money to pay your bills
- File your taxes
- Operate your small business
- Conduct your banking transactions
- Manage your investments
- Buy, sell, and/or manage your property
- Manage your retirement accounts
- Hire someone to represent you in court
- Give gifts or donations on your behalf
You may also give your agent the ability to make certain health care decisions for you, such as:
- Managing your funds to pay for medical treatments or other care
- Choosing or changing your health insurance plan
- Appealing coverage denials
Note: You may need to name someone your health care proxy (see How Does a Health Care Proxy Work?) if you want them to be able to make medical decisions on your behalf, not just decisions related to insurance and payment. You can appoint the same person as your health care proxy and power of attorney, but you may be required to fill out two separate documents. Power of attorney documents are valid until you revoke your agent’s power, become incapacitated and unable to communicate due to a temporary or permanent illness or injury or die. If want your agent to make decisions on your behalf when you are incapacitated, you have the option of creating a durable power of attorney document. Your agent will still be bound by the decision-making restrictions you specify in the document.
Power of attorney documents may let you name a second person as your backup agent if your primary agent cannot fulfill their duties. It is a good idea to name a backup agent, if possible.
Consult a lawyer to create a power of attorney document (see Where Can I Get Legal Assistance for Planning Future Care?). The document needs to meet state requirements, be tailored to your individual needs, and be drafted with precise legal language.
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