A Practical Guide to Setting Up a Power of Attorney
Creating a Power of Attorney involves more than just filling out a form. It’s a thoughtful process of making crucial life decisions. While this guide provides a roadmap, remember that these steps are best taken with guidance from a qualified legal professional. Here is a practical, step-by-step overview of what to expect when you’re ready to set up a durable power of attorney for an elderly parent or yourself.
Step 1: The Conversation — Choosing Your Agent
This is the most important decision in the entire process. Your agent will have immense power and responsibility. This choice should not be made lightly or based on birth order.
A good agent should be:
- Trustworthy: This is non-negotiable. You must have absolute faith in their integrity and that they will honor your wishes and act in your best interest.
- Organized and Responsible: The role involves managing paperwork, paying bills on time, and keeping meticulous records.
- Assertive: Your agent may need to advocate for you with banks, government agencies, or healthcare providers. They need to be firm but respectful.
- Willing to Serve: Have an open and honest conversation with your potential agent. Do they understand what the role entails? Are they comfortable accepting this responsibility? Never appoint someone without their full consent.
- Geographically Close (if possible): While not a strict requirement, having an agent who lives nearby can make tasks like dealing with local banks or meeting with doctors much easier.
It is also critical to name a successor agent (or alternate agent). This is the person who will step in if your primary agent is unable or unwilling to serve due to their own death, illness, or other reasons. Without a successor, your family might end up in court after all.
Step 2: Defining the Powers You Will Grant
A Power of Attorney is not an all-or-nothing document. You have control over the specific powers you grant to your agent. State laws often provide a long list of potential powers that you can choose to include or exclude. Be specific.
Common powers for a financial POA include the authority to:
- Manage bank accounts, including deposits and withdrawals.
- Pay bills and handle debts.
- Buy, sell, or manage real estate.
- Manage stocks, bonds, and other investments.
- File and pay taxes.
- Apply for public benefits like Social Security, Medicare, or Medicaid.
- Operate a small business.
Common powers for a medical POA include the authority to:
- Consent to or refuse medical treatments, tests, or surgery.
- Choose or fire doctors and other healthcare providers.
- Decide on admission to or discharge from hospitals and nursing homes.
- Access your medical records (a right protected by HIPAA).
- Make decisions about life-sustaining treatment, in accordance with your living will.
Step 3: Creating the Legal Document
Because Power of Attorney laws are highly specific to each state, using a generic, one-size-fits-all form from the internet can be risky. The document must comply with your state’s legal requirements to be valid.
You generally have three options for creating the document:
- Hire an Elder Law Attorney: This is the most recommended path. An experienced attorney will not only draft a document that is legally sound in your state but will also provide crucial advice, help you think through difficult decisions, and tailor the document to your unique family and financial situation.
- Use State Statutory Forms: Many states have created official, pre-approved POA forms that you can download. These are a low-cost and often reliable option, but they are standardized and may not account for special circumstances you may have.
- Utilize Online Legal Services: Some websites offer guided software to help you create a POA. While more customized than a blank form, they do not replace the personalized advice of a qualified attorney.
Step 4: Properly Signing and Executing the Document
A Power of Attorney is a formal legal document, and it must be signed correctly to be valid. The requirements vary by state but typically include:
- The Principal’s Signature: You must sign the document in the presence of a notary public.
- Notarization: A notary public will verify your identity, witness your signature, and apply their official seal. This is a nearly universal requirement.
- Witnesses: Some states require one or two witnesses to also sign the document. There are usually rules about who can be a witness (for example, the agent or notary often cannot also be a witness).
Crucially, the principal must be of sound mind—or legally competent—at the time of signing. This means you must understand the nature of the document and the powers you are granting. This is why it is essential to create a POA as part of your life plan, not in the middle of a health crisis.
Step 5: Storing and Distributing Copies
Once the document is signed, it needs to be accessible. Your agent cannot use it if they cannot find it.
- Original Document: Keep the original in a safe but accessible place, such as a fireproof home safe or a safe deposit box. Make sure your agent knows where it is and how to access it.
- Copies: Provide copies to your agent, your successor agent, and any financial institutions or doctors who will need to interact with your agent.
It’s a very good idea to proactively give a copy of your financial POA to your bank and investment firms. They may have their own internal review process, and clearing this hurdle in advance will make things much smoother for your agent if and when they need to act.
For official information, consult government resources like USA.gov, the Consumer Financial Protection Bureau (CFPB), and the Federal Trade Commission (FTC).
For tax-related topics, refer to the IRS. For information on Social Security, visit the Social Security Administration.
