How To Establish Power of Attorney (POA) For a Loved One

There are certain topics most of us try and avoid. Things such as death, severe illness, or mental incapacity. Though unpleasant, it’s crucial to consider these possibilities when planning ahead. The aging process catches up with all of us eventually, but with some forethought and planning, you can save money, secure a comfortable future, and ensure your wishes are met.

One of the easiest ways to guarantee you and your loved ones are on the same page is by drafting a power of attorney (POA). This legally binding document designates someone whom you love and trust to handle your medical and/or financial decisions.

We reached out to a panel of legal experts to learn more about establishing power of attorney. The experts included Patrick Simasko, an elder attorney and financial advisor at Simasko Law in Mount Clemens, Michigan; Sandra Choi, an estate planning and family law attorney at The Choi Law Firm with offices in Bayside, New York, and Fort Lee, New Jersey; and Richard J. Brandenstein, attorney and founding partner at Fusco, Brand & Rada, P.C., in New York City.

Below, we answer some of the most commonly asked questions and provide some tips and tricks for drafting a power of attorney.

What is a Power of Attorney?

Before you plan or draft a power of attorney, it’s important to understand what it is.

“A power of attorney is a formal document which confers rights on a trusted third party to act on your behalf,” Choi said. “The document can confer those responsibilities right away, or alternatively, in the event of your physical or mental incapacity (a ‘springing’ power of attorney because the document only becomes effective if you become unable to handle your own affairs).” 

“Medical and financial powers of attorney are two of the most important documents a family needs,” agreed Simasko. “By appointing someone to make decisions for you, it’s possible to secure medical and financial care if you’re incapacitated.”

When is a power of attorney necessary?

If you’re getting older, but can still manage your personal, financial, and medical affairs, a power of attorney probably isn’t on the top of your priority list. Even so, it’s important to act quickly.

“Setting up power of attorney is a good idea because of one of the realities of life; as people get older, they become less able to manage their affairs effectively,” said Brandenstein. “This can be a touchy subject because nobody wants to surrender their independence, but if you're a caregiver, it could save you a lot of trouble down the line.”

“The person granting power of attorney must have all their mental faculties at the time it is given,” Brandenstein added. “But there is usually an understanding that this won’t always be the case, due to a permanent illness or disability, such as Alzheimer’s or Parkinson’s.”

Not only can a power of attorney provide a plan for the future, but it can also help keep you out of the courts.

“POAs are necessary to keep families and loved ones from having to go to the probate court,” Simasko said.  

“With these documents, your family will never have to go to court to get guardianship or conservatorship over you. Plus, taking the time to create these documents can save you costly court fees later on.”

Who should I contact when planning power of attorney?

If you’re getting ready to create a power of attorney for yourself or a loved one, Choi recommends finding a good lawyer first.

“If necessary, a lawyer can bring a good accountant or investment adviser on board.”

Since a power of attorney is a binding legal document, it’s also imperative you follow all of the applicable rules and guidelines. 

“Procedures for setting up a power of attorney vary according to state laws and regulations,” Brandenstein said. “But, it’s worth bearing in mind that you’ll need a witness present and they’ll be required to sign the document.”

“It’s also important to discuss your decisions with your friends and family,” Simasko said. “Ensure whoever you choose as financial and/or medical powers of attorney, understand their roles and responsibilities. The most important thing is to pick someone who you trust to make these decisions.”

What items should a power of attorney include?

There are no set rules for creating a power of attorney document, but there are a few things to consider.

“Typically, one or more power(s) of attorney should be prepared covering all aspects of major decision-making, in both health and finances,” Choi said. “It would make little sense to delegate the power to make healthcare decisions, but empower no one to pay medical bills or deal with insurance companies.”

“Sometimes, clients feel most comfortable delegating both spheres of responsibility to the same person. But that isn’t a requirement. Perhaps one trusted friend or relative is financially savvy and another has a deep understanding of your healthcare needs.”

In that case, you could split the responsibilities and share the load.

Pro tip: In case of an emergency, Choi says that it’s a good idea to draft a healthcare proxy. “This separate document can be presented to a hospital or urgent care facility without confusing staff with irrelevant facts about your financial power of attorney.”

What else should I consider when choosing someone to handle medical or financial directives?

Creating a power of attorney can be intimidating, especially if you don’t have legal or financial training. Don’t sign anything unless you fully understand the ramifications. 

“If you have uncertainty, feel free to speak up!” said Choi. “Your attorney has probably addressed similar concerns many times before. If not, that’s when you put your heads together to draft power of attorney language that’s tailored to your situation.”

Specificity also matters. Choi says that to avoid ambiguity, keep the instructions in your power of attorney document as objective and detailed as possible. 

Lastly, really think about who you select as an executor.

“A power of attorney helps protect you from financial exploitation. Whoever is elected power of attorney has the ability to go into your financial accounts and ensure there aren’t inappropriate transactions. As long as your power of attorney acts responsibly, your assets shouldn’t be at risk.”

Don’t wait to draft a power of attorney

Drafting a power of attorney document is one of the best decisions you can make. Writing down your medical and financial directives now can help your loved ones act if an injury or illness occurs. 

In related reading, check out these 5 long-distance caregiving tips for when you live miles apart from your loved one.