Reduced ability to manage finance and healthcare decisions may come naturally with age or in the event of an emergency. In order to allow a family member or friend to make decisions on your behalf, a power of attorney will need to be granted.
What is Power of Attorney?
A Power of Attorney (POA) is a document allowing a person (agent) to act on another’s behalf without their active participation. There are several kinds of POAs that can be chosen depending on your needs. These include Health Care and Financial POAs in either durable or springing form.
You may specify what abilities your agent has for each POA, along with giving instructions for any decisions you have already made.
What Requires a POA?
Although some tasks can be completed on your behalf without a power of attorney, many important tasks require evidence of your agent’s authority to act on your behalf. Some of these tasks include preparing and filing taxes on your behalf, when asking questions of or banking in your accounts, and making health decisions1.
Health Care POA
A Health Care POA, also known as a Medical POA, allows the agent to make health care decisions when you are unable. The agent’s decisions must be made in your best interest and in accordance with any instructions you have given.
The agent has the authority to:
- Consult with healthcare providers
- Authorize your admission and transfer
- Provide written consent
- Gain access to medical records
- Apply for public assistance on your behalf
- Authorize the release of medical information and records
- Withhold or withdraw life-prolonging procedures
A Financial POA allows the agent to handle financial transactions on your behalf. The agent must act in your best interest, maintain records, and keep their own property separate.
The agent has the authority to:
- Pay everyday expenses
- Invest money
- File and pay taxes
- Manage insurance policies
- Collect government benefits
- Claim your inheritance
- Transfer property
- Manage retirement accounts
- Maintain real estate and other property
A durable power of attorney is one which remains in effect if you become mentally incapacitated. Durable POAs generally go into effect as soon as they are signed. The agent is able to begin making decisions immediately.
A springing power of attorney is one which only goes into effect if you become mentally incapacitated and are unable to make informed decisions. This allows you to maintain control over decisions until you are no longer able. The agent will need to provide proof of mental incompetence in order to make decisions on your behalf.
How is Mental Competence Determined?
POAs can only be created when you have the mental capacity to understand the full meaning of signing the POA document. This is due to your signature on the document representing informed agreement to the document.
The legal test for mental capacity to sign a POA is set out in the Mental Capacity Act of 20052. This act requires that an individual be ale to complete a number of tasks. These include understanding the information relevant to the decision, retaining the information, using the information as part of the process of making the decision of authority, and appropriately communicate the decision2.
In order to determine mental competence, a doctor will generally consider your ability to understand importance and implications of a situation and the ability to communicate reasoned decisions.
Mental incompetence is verified by a doctor’s written confirmation. You may specify in your POA how your mental competence is to be determined. This could include confirmation by a particular physician or the agreement of two licensed physicians.
Choosing an Agent
An agent should be someone you trust. The chosen agent should be someone who won’t abuse power granted to them. Someone who will look out for your best interest regarding your health, finances, and well-being should you be unable to act for yourself. A family member or close trusted friend is generally chosen for Health Care POA, while an individual adept in business matters is selected for Financial POA1.
A successor agent should also be appointed in case the agent refuses to serve or is unable to serve due to death or mental incompetence. The successor agent will take over if the original agent becomes incapable.
If an agent is not chosen in advance, your family could face the difficult and frustrating task of seeking authority to act on your behalf through the court system1. No matter your current circumstances, it is easier to select POA agents before the need arises.
Revocation of POA
POA ends at the time of your death. However, POA can also end if you revoke it while mentally competent, you divorce your agent, a court invalidates the document, or if none of the agents are able to serve.
You should consider signing a POA no matter your health. In the event of an emergency that renders you unable to communicate, a POA can expedite your health care treatment process and ensure your finances remain organized. In order to choose the best POA and agent for your situation, make sure you understand the different types and discuss options with an attorney.
1Dulaney, K. (2015). Don’t forget power of attorney. Arkansas Business, 32(39), 23.
2Potter, I. (2010). Understanding mental capacity and the power of attorney. British Journal of Neuroscience Nursing, 6(2), 83-85.