Understanding Power of Attorney Limitations

Written by Chad Birt on Sat Nov 05 2022.

In a recent article, we discussed how to establish power of attorney (POA) for a loved one. This legal designation is one of the most commonly requested, but it comes with responsibilities and limitations. Since many new caregivers have questions about these limitations, we wanted to cover the topic in-depth.

To learn more, we reached out to a panel of legal experts, including Rick Nehora, managing partner at Californa Law Firm; Marcus O’Toole-Gelo, Esq. from Cona Elder Law a leading elder law firm based in Long Island, New York; and Mary Kate D’Souza, co-founder and Chief Legal Officer of gentreo.com, a next-generation online estate planning solution.

What is a power of attorney?

A power of attorney (POA) is a legal document that allows an individual (principal) to assign certain medical and/or financial powers to a friend or family member (nominee).

“In the popular TV series Game of Thrones, every ruler has a ‘Hand’, who advises them,” Nehora said. “The Hand also has the powers to be the voice of the ruler’s wisdom and is ofttimes allowed to rule in the place of the King. Similarly, the person who receives the power of attorney has the power to make medical decisions about the treatment of the principal. They also have the powers to sign any legal documents on the principal’s behalf.”

Who needs to draft a power of attorney?

If you're healthy and independent, drafting a power of attorney probably isn’t at the top of your to-do list, but it should be.

“POAs are necessary and in fact, all capable Americans over 18 should have them,” D’Souza said. “They become especially important as people age and/or suffer a health decline. If you choose not to grant someone power of attorney, you’re risking the court appointing a stranger to manage your finances and assets. Failing to appoint someone is a much more costly approach and could inadvertently pit trusted loved ones against each other.”

Does a Power of Attorney document have limitations?

Some people avoid drafting a power of attorney because they fear their nominee will have complete control over their medical care and finances, but that’s far from the case. Anyone acting as a nominee is required by law to make decisions in their principal’s best interest.

POA nominees cannot:

Change the principal’s will
Break the fiduciary responsibility to act in the principal’s best interest
Make decisions after the principal dies
Change or transfer power of attorney to someone else

Likewise, principals can take additional steps to restrict a nominee’s decision-making powers.

“You can limit both the time and duration of the POA and also the powers included,” D’Souza said. “Grant as many or as little as you want. For example, you could have a power of attorney only to become active when a doctor determines you lack capacity. The only downside to that is if the doctor makes the determination, there is no one managing your finances. Therefore, you may want to reconsider your choice of nominee if you don’t trust them to make all of your decisions.”

What if my nominee acts beyond the power of attorney limitations?

Since a POA is a legally binding document, any nominee who acts beyond its limitations may be held liable in court.

“The principal, or certain family members, can bring a legal proceeding to remove the agent and even recover damages against them,” O-Toole-Gelo said.

“If the nominee acts against the principal’s best interest, it’s a violation of their fiduciary duty and responsibility and they can be sued for malfeasance,” D’Souza added.

How can I protect myself from POA-related legal problems?

The easiest way to prevent legal problems when drafting a POA is to thoroughly review your nominee.

“Make sure you appoint a trusted loved one whom you have known and respected for years,” D’Souza said. “By choosing someone well known to you, you are more likely to guarantee that your nominee won’t act against your wishes.”

When planning for the future, a POA is only the first step

Now that you know more about the power of attorney limitations, we hope you consider drafting one.

“A power of attorney is a part of an overall estate plan that features several documents, including a healthcare proxy, last will, and testament, and possibly, a trust,” O’Toole-Gelo said.

“If someone is interested, they should contact an experienced elder law and estate planning attorney to discuss their plan.”

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