Understanding the Limitations of a Power of Attorney

Laura Herman, Dementia and Eldercare Professional
Added: 06.22.2022
28 minutes read
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As a family caregiver to an older adult, it’s important to have a basic understanding of powers of attorney.

A power of attorney (POA) document grants a person (the “agent”) authority to act or make decisions on another’s (the “principal’s”) behalf. 

Some POAs grant the agent broad, all-encompassing authority, while others limit their powers to specific matters, or to a defined period of time.

This article focuses on the types of POAs most common in elder care: the durable financial power of attorney and the power of attorney for healthcare.

You’ll find answers to many common questions regarding POAs and you can expect that, by the time you’ve read through, you’ll have a basic understanding of how POAs and how they relate to your loved one's situation.

Table of Contents
  1. What's a Durable Power of Attorney?
  2. At What Point Does My Loved One Need A POA?
  3. Who Makes Decisions if My Loved One Doesn’t Have a POA?
  4. What Can and Can’t a POA Do?
  5. Powers that Require Specific Mention
  6. How can Capacity and Competence Determined?
  7. Can I Get a POA for my Loved One with Dementia?
  8. What’s the Difference Between a POA, a Conservator, and a Guardian?
  9. Who Should Your Loved One Select as their Agent?
  10. Can more than one person share POA duties?
  11. Frequently Asked Questions About POAs
  12. How to Set Up a Power of Attorney

What’s a Durable Power of Attorney?
Durable POA: By default, in most states, a power of attorney document becomes invalid once the principal is incapacitated. In contrast, a “durable” power of attorney will remain in force until it’s revoked or the principal dies.

Medical, Financial and Other Types of POAs

Types of POAs include:
  • Conventional POA: The POA is in effect immediately and becomes invalid if the principal becomes incapable of making coherent decisions. 
  • Durable General POA (or Financial Power of Attorney): A POA that grants a wide range of legal and financial authorities and remains in effect even if the principal is incapacitated. 
  • General POA: A conventional POA granting a broad range of authority. 
  • Limited POA: A conventional POA that grants the agent authority in a specific area (such as buying and selling investments on a client’s behalf).
  • Springing POA: A springing POA is initially dormant and becomes active only when a specified event occurs (such as the principal’s doctor declares them to be incapacitated).
  • Medical POA (or Durable Power of Attorney for Healthcare): Medical POAs give an agent authority to make healthcare decisions on their behalf. They typically “spring” into effect when the principal becomes incapacitated, although they can be customized as needed to a variety of situations. 
At What Point Does My Loved One Need A POA?
A power of attorney is an important element in advance care planning and estate planning. A POA must be enacted early – before it’s “needed” – because in elder care, by the time it’s needed, it’s probably too late to get one. 

Your loved one must be of sound mind to set up a POA for themselves. You can't “get” a POA for them after a sudden change in health or when you realize that they’re no longer capable of handling their affairs. 
 At that point, your loved one will need to be assigned a guardian or conservator through the court system, a process that’s much more lengthy, costly, stressful, and public than completing a POA.

Technically, all adults should have a POA in place, as no one’s immune from an unexpected tragedy. However, the issue becomes all the more pressing as the chances for needing one rise with age. 

  • When caregiving for an older loved one, be sure they have both of these documents in place as early as possible.
    • A durable financial power of attorney
    • A durable power of attorney for healthcare 
Who Makes Decisions if My Loved One Doesn’t Have a POA?

If your loved one becomes unable to speak for themselves, and they don’t have a POA in place, a court can assign them a guardian or conservator. However, it’s a rather lengthy process, so until someone is appointed, most states allow urgent health care decisions can be made by a hierarchy of surrogates in this order:
  1. Spouse / domestic partner
  2. Adult child
  3. Adult sibling
  4. Close friend
  5. Nearest relative
However, doctors have encountered all kinds of issues with this surrogate hierarchy, often resulting in often avoidable confusion, conflict, delay in treatment, or a failure to honor the person’s wishes. 

  • Planning properly will greatly enhance the chances that your loved one’s wishes regarding their care will be met with less distress, difficulty, or conflict.
What Can and Can’t a POA Do?
POA documents can be custom-written to specify the exact authority they do or don’t grant the agent, although there are powers they’re prohibited from granting. 

POAs Can:

Durable financial POA documents generally authorize the agent to:
  • Pay bills and manage the principal’s finances
  • Sign documents or enter contracts on the principal’s behalf
  • Open, close, and manage bank accounts
  • Apply for Medicaid or other programs
  • Buy or sell property on the principal’s behalf 
Durable medical POA documents generally allow the agent to:
  • Make decisions regarding medical treatment, life-sustaining treatment, and end-of-life care
  • Determine who assists with eating, bathing, and personal care, if needed
  • Choose or change doctors or other healthcare providers
  • Select a long-term care provider or senior living facility
  • Decide about organ donation
  • Obtain medical records
POAs Cannot:
POAs cannot allow an agent to:
  • Change the principal’s will
  • Represent the principal after the moment of death
  • Vote in public elections on behalf of the principal
  • Break their “Fiduciary Duty” (Act in a way that’s not in the principal’s best interests)
  • Use the person’s money or assets as their own
  • Transfer the POA to another person
  • Make decisions for the person before the POA is in effect (as specified in the document, usually when the person is incapacitated)
Powers that Require Specific Mention:
Even if your loved one’s general POA grants their agent “all powers”, there are some powers that may need to be specifically spelled out in the document to allow them. These may vary from state to state. 

A POA may have to specifically address:
  • Gifting money or property
  • Designating beneficiaries of insurance policies
  • Changing community property agreements
  • Paying the agent for their service
How are Capacity and Competence Determined?

To create a POA, your loved one must have the “capacity”, or ability, to understand the consequences of their choices at the time they sign the document.

Different states vary a bit on the letter of the law when it comes to determining capacity, but they’re looking for basically the same criteria.

To be considered capable to complete a POA, a person must be:
  • Conscious and alert
  • Able to communicate
  • Able to concentrate, pay attention and follow a conversation 
  • Oriented to time, place, person, and situation
  • Adequately able to access short and long term memories 
  • Able to reason, use logic and understand abstract concepts
  • Able to plan, organize and work toward goals in their own self-interest
Sometimes it's obvious that a person lacks the capacity to understand a situation – but this area can certainly be grey. Foggy periods may alternate with moments of clarity, or your loved one might be clear in certain matters but not others. Furthermore, illness, stress, dehydration, and other conditions can temporarily affect a person’s capacity.

Your loved one’s doctor can assess their capacity if needed. Some POAs spell out the circumstance in which the principal will be considered incapacitated, such as if two doctors agree on the matter.

Note that “capacity” is not the same as “competence”. It’s up to the court to declare a person incompetent, which would mean that they permanently lacked capacity. However, it may not be necessary to involve the courts to invoke a POA unless someone – including your loved one – is challenging the matter of capacity.

Elder law attorneys are an excellent resource if there are any questions on this topic. They are skilled at determining whether their client meets the criteria for capacity, and can recommend the next steps as needed. 

It’s recommended to work with an elder law attorney to set up a POA if you anticipate that anyone may challenge your loved one’s capacity. They’ll be able to provide strong testimony to your loved one’s capacity should the need arise.

Can I Get a POA for my Loved One with Dementia?
You can’t “get” a POA for someone else. They have to decide to do it themselves – and they must be mentally competent to understand their decision. 

A diagnosis of dementia doesn’t necessarily mean that they don’t understand the consequences of their choices, especially in the earlier stages. As long as they have capacity, it’s still possible for them to complete a POA.

If you anticipate a disgruntled sibling, or someone else, may question whether your loved one was indeed mentally competent at the time of signing the POA, there are steps you can take to protect your loved one.

To document competency it can help to: 
  • Consult with an elder law attorney
  • Sign the POA in front of witnesses who also sign statements that your loved one seemed competent 
  • Record a video of your loved one explaining their wishes as they relate to their POA
  • Include a dated, signed statement from your loved one’s doctor that, in their opinion, your loved one was capable of understanding their decision
If your loved one isn’t able to understand the consequences of their choices, you’ll need to petition the court for guardianship instead.
What’s the Difference Between a POA, a Conservator, and a Guardian?

A person appoints their own agent(s) with a POA and they must be mentally competent to do so. They retain the right to override their agent’s decisions. 

If a person is not competent to manage their affairs, the court can appoint them a guardian or conservator, who can override the person's (the “ward’s”) wishes if they see fit.

Guardianship: A court-appointed guardian has the final say over a wide range of medical and personal decisions for their ward, with essentially the same rights, powers, and duties as a parent has over their minor children.

Conservatorship: A court-appointed conservator has the authority to handle financial matters on their ward’s behalf.

Often, the court will appoint the same person to be both guardian and conservator. 

Who Should Your Loved One Select as their Agent?

It’s incredibly important that your loved one choose an agent they completely trust – simply selecting their spouse, eldest child, or closest relative shouldn’t be a foregone conclusion. In many cases, a close friend or paid professional is ultimately a better choice than a family member.

A POA agent should:
  • Be completely trustworthy
  • Be very dependable
  • Listen attentively to your loved one’s wishes
  • Be able and willing to uphold your loved one’s wishes (even if it’s difficult, emotional, or conflicts with their own) 
Agents who will be managing money should have at least a basic ability to do so – the nephew who can’t even balance his checkbook may not be the best choice. However, integrity is even more important than financial ability in an agent. They have access to all your loved one’s assets, and it can be very difficult to reclaim any money swindled from a dishonest agent.

A health care agent doesn’t necessarily need a background in medicine, but it can be helpful, if possible.

If separate agents are named for financial and medical matters, it’s wise to avoid appointing people who don’t work well together, since they may need to collaborate on care issues. For example, the health care agent can select the best senior living facility, but the financial agent will need to approve the costs. 

Can more than one person share POA duties?

Many people appoint more than one agent in their POA. The most common way to share duties is for one individual to serve as a financial agent and another to serve as a health care agent. 

It’s also smart to appoint a secondary agent in the event the primary is unable to carry out their duties for any reason. 

While some people do appoint co-agents to serve together as equals, this arrangement is more likely to result in confusion, conflict, or delay when only one can be reached during an emergency, or if they disagree about how to handle a situation.

Frequently Asked Questions About POAs
Family caregivers tend to have many questions about POAs. Here are some of the most common.

What is an attorney-in-fact?
An “attorney-in-fact” is a person who is authorized to act on behalf of another. It can be used interchangeably with the term “agent”.

What is fiduciary duty?
Fiduciary duty is a legal obligation to always act in another’s best interest. An agent appointed by a POA has a fiduciary duty toward their principal and can be held legally accountable if they make decisions that breach it. 

Examples of breach of fiduciary duty include:
  • Selling the principal’s property at unreasonably low rates to family or friends
  • Incurring foolish debts or failing to manage their finances properly
  • Giving improper gifts from the principal’s estate
  • Overpaying themselves for their own services
  • Commingling funds with the principal
  • Failing to keep good financial records 
Can a POA pay themselves for their service?
It’s generally agreed that POAs should be able to pay themselves a “reasonable” amount, especially if they’re devoting a lot of time to their duties. What’s considered a reasonable rate varies depending on where you live and exactly what you’re doing. 

Be sure that the payment is described in the POA document. Some states allow the agent compensation only if it’s specifically addressed in the POA. Whether or not it’s required, being up-front and transparent about payments can prevent trouble down the line, such as accusations of fund mismanagement or lost eligibility for Medicaid (if it’s determined the payments were technically gifts).

A written personal caregiver contract is also recommended to protect both yourself and your loved one, and any earnings should be treated as taxable income.

Consult with an elder law attorney if you’re representing both yourself and your loved one as you sign the contract to ensure the arrangement looks fair to an objective eye.

Note that reimbursement for expenses is different from compensation. POAs are always entitled to reimbursement for expenses – just keep your records clear and organized.

Am I liable for my loved one’s debts if I have POA?
As long as you’re making a good faith effort to act in your loved one’s best interest – and aren’t being careless or negligent – you generally won’t be held personally responsible for debts incurred by your loved one’s estate. 

Can I vote on my loved one’s behalf if I am POA?
You can assist your loved one to access or complete their ballot if they’re physically unable to do so, but you can’t cast a vote for them just because you know how they “would have” voted if they could. 
Can I override my loved one’s wishes if I have POA?
The principal in a POA has the final say in all matters, so their agent cannot override their wishes. 

If you're concerned that your loved one isn't able to understand their decisions, you can take the matter to court. A judge will determine whether they lack competence and if so, will appoint a guardian who can override their wishes.

Unless a person is declared incompetent, they have the right to make decisions for themselves – even “bad” ones. 

Can I challenge a POA if I believe my loved one’s agent isn’t acting in their best interest?
If you’re concerned that your loved one’s agent isn’t acting in their best interest, you can file a petition challenging them in court. Talk to an elder law attorney for help. If the court agrees, they’ll appoint a guardian to watch out for your loved one.

If you’re concerned that the POA may be abusing or exploiting your loved one you should also contact your local Adult Protective Service. They have the authority to investigate the matter and protect your loved one from harm.

Can my loved one’s POA prevent me from seeing my loved one?
The medical POA agent can deny visitation to particular people if they believe the visit would be detrimental to your loved one’s health. However, this can be a very grey area. Usually, the agent can’t prevent visits from people your loved one wants to see.

If you’ve been unable to talk out the situation with the agent you can contact an elder law attorney, or your local ombudsman if they live in a senior care setting. 

Isolation can be a form of emotional elder abuse. If you believe that your loved one’s POA may be abusing them, contact your local Adult Protective Service office to report your concerns.

Can a doctor override a POA’s decision?
Doctors and other medical providers generally must comply with a POA agent’s decisions, although there are a few exceptions.

Potential reasons a medical provider may not comply with a POA’s decision:
  • It conflicts with the conscience of the provider
  • It conflicts with the policies of the hospital or organization
  • It would result in ineffective or substandard health care
If the doctor doesn’t feel comfortable complying with the agent’s decision they’re typically required to inform them immediately and offer the option of transferring to another provider where the wishes will be honored.

Is a POA written in one state recognized in another?
POA documents are written under state laws. Once signed, a POA may or may not be accepted in another state. Sometimes it comes down to the policy of a particular organization on whether or not they will honor an out-of-state POA. 

POAs can be created in multiple states if needed.

Can a POA be revoked or changed?
A POA can be revoked or changed as long as the person is mentally competent. Simply destroy the original document and prepare a new one, or prepare a revocation document declaring the POA is no longer valid. 

If the document has been given to individuals or healthcare providers, be sure to provide them with the updated documentation.

Do I need a POA if I have a living will?
Yes, POAs and living wills are different documents, and each is an important inclusion in the advance care planning toolbox.

A living will outlines your loved one’s wishes about emergency or end-of-life care, such as whether they’d like life support, intubation, CPR, or if they’d prefer to allow a natural death. It’s a powerful document that can speak loudly when your loved one is in a vulnerable state.

However, the living will can’t describe every situation that could potentially arise, which is why it’s vital for your loved one to also name an agent who can make decisions on their behalf should they lose the ability to speak for themselves. 

How to Set Up a Power of Attorney
It can be very easy to set up a power of attorney. Find a form on the internet, print, complete, and sign it – it can be done in less than five minutes.

However – POAs are powerful documents, and small mistakes in completing them can have significant and lasting consequences. It’s vital to give careful consideration to the choice of agents and to understand every detail before signing a POA.

Do I need a lawyer to set up a POA?
A lawyer is not technically required to set up a POA, and there are plenty of forms online that make it a fairly simple process to complete, print and sign. 

However, it’s generally recommended to consult with an elder law attorney regardless, even if just to review the document to ensure it reflects the principal's wishes accurately. Elder law attorneys are also skilled at knowing which questions to ask and can guide clients through the decision-making process in a simple, efficient and effective manner.

You should consult with a lawyer if:
  • Your loved one’s situation is complicated in some way
  • You want to limit your agent’s powers to certain acts, situations, or timelines
  • Your loved one’s capacity is questionable
  • You have difficult family dynamics
  • You have any questions
Does a POA Need to be Notarized?

Most states require a POA to be notarized, and most people do choose to notarize it even when not strictly required. 

If the POA grants authority over real estate it should be notarized.

Does a POA need to be witnessed?
Although most states don’t require witnesses’ signatures on a POA document, it can be a good idea to include a couple to strengthen the contract and reduce the likelihood that organizations may balk at recognizing them. 

The notary public and anyone named agents should not sign as witnesses.

Step by Step Guide to Setting Up a POA
  1. Select the right agent(s) carefully. 
    • Choose a financial agent and healthcare agent. They can be the same person if desired.
    • Consider naming a successor agent, in case the primary agent is unavailable.
  2. Discuss your wishes with your agent.
    • Ensure they are willing to carry out their duties, should the need arise.
  3. Draft the document. 
    • You can use an online form – ensure it’s valid in your loved one’s state – or contact an elder law attorney for assistance.
    • If you start with an online form, consider consulting with an elder law attorney to review the form before signing it.
  4. Execute the form by signing, witnessing, and notarizing the form, as needed.
    • It’s a good idea to witness and notarize it, even if your state doesn’t mandate it.
    • Check your state’s laws to see if your agents are required to sign as well.
  5. Provide each agent with a copy of the document, and keep the original in a safe spot, such as a fireproof safe.
  6. Ensure your agents have what they need (such as basic information about financial or medical matters, for example) should they suddenly need to step in and take over.
POAs are Powerful, Vital Tools for Future Planning – but it’s Important they’re Done Right and Done Now

A power of attorney document is a powerful and very important part of estate planning and advance care planning, and having this document in place before it’s needed can make an enormous difference if your loved one has a sudden change in health or ability to make decisions. 

If you’re a family caregiver for an older loved one, ensuring they have a valid POA that reflects their wishes accurately should be near the top of your to-do list. 

A power of attorney has some distinct limitations, and it can never override your loved one’s wishes. If they lack the capacity to understand the consequences of their decisions they won’t be able to set up a POA – the court will have to appoint a guardian instead.

While not strictly necessary, it’s recommended to consult with an elder law attorney to ensure the POA document accurately reflects your loved one’s wishes that it will be strong enough to weather any challenges as it supports them into the future.

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