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  • Writer's pictureLeslie A. Farber

Power of Attorney: Facts and Risks

Updated: Jul 2, 2019

Power of attorney

Establishing a power of attorney (POA) is something many people believe they don’t need to be concerned about until late in life. However, waiting increases the risk of becoming mentally or physically incapacitated before you can designate someone you trust to make decisions for you. Since you must be of sound mind and body at the time you create a POA, it is wise to consider doing so at the same time as you are drawing up your will or as part of your estate planning.

A POA is a document that lets you (the principal) appoint a person or organization (an agent) to manage decisions on your behalf if you are unable to doing so. The main type of a POA is for financial purposes. Some people may use the term “medical power of attorney (POA)” (also referred to as a healthcare POA) to give the agent the authority to make decisions about the care the principal receives, which may include withholding or stopping medical procedures, treatments, and services. This document also is known as a healthcare proxy or appointment of health care representive. However, I do not recommend using the term “medical power of attorney” because it easily can be confused with a financial power of attorney, and prefer the term health care proxy or appointment of health care representative.

With a financial POA, the person you appoint is known as your “agent” (or “attorney-in-fact”) and gives that person or entity the ability to make financial decisions on behalf of the principal (you), including handling matters such as overseeing business interests and protecting personal or estate assets.

You can give a power of attorney, but common choices are a spouse, child, relative, or close friend. Because giving an individual POA makes it possible for them to misuse their powers, it is essential that you carefully consider who you can trust to manage your personal affairs and make decisions on your behalf.

POAs differ depending on a number of factors, such as when you want the authority to start and end, how much responsibility you want to give your agent, and laws in the state where you live. The formal document, or plan, determines the amount of power the appointed agent will have in making decisions for you, your property, or both, and it can be as broad or as specific as you wish. The agent takes full responsibility for the choices made under the power-of-attorney guidelines, and is usually required to keep a record of financial transactions or medical decisions.

The process for obtaining a POA varies, but working with an experienced attorney to draw up the document will help ensure that it accurately reflects your wishes and conforms with your state’s requirements. For a POA form to be legal, the signer must be mentally competent, acting by choice, and have at least two witnesses present. Some states also require that your signed POA form be notarized.

Having authority granted by the POA gives your agent unmonitored access to your personal information and funds. Although your agent has a fiduciary responsibility to act in your best interests, there is always a risk they will abuse their power. They may spend your money without your knowledge, make poor investments, misuse your access to credit, incur debt in your name, or fail to pay your expenses in a timely manner, any or all of which could have devastating consequences.

To protect yourself, consider including language in your POA document limiting the power of your designated agent. Outline in detail the powers your agent does and does not have. You can also create a limited power of attorney that is temporary, revocable, and allows your agent to conduct only specific transactions on your behalf.

It is a good idea to inform friends or family about your choice of agent. If they suspect the agent is acting improperly, they may be able to take legal action to have the power of attorney authority revoked.

Make sure you choose an attorney who is familiar with the issues that can arise when a power is invoked. They will be able to advise you on how best to make clear the extent of the responsibilities you want to delegate. If you have questions or concerns about establishing a POA, please contact us at 973-509-8500 x213 or

The contents of this writing are intended for general information purposes only and should not be construed as legal advice or opinion in any specific facts or circumstances.

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