When You Are Called to Act
A power of attorney (POA) authorizes an agent to act for another person, called the principal. If you have been named, start by reading the document and confirming when it takes effect and which actions it permits.
Authority may begin immediately or, where permitted, after a specified event. Do not assume incapacity is required. The document and applicable state law determine when you may act; ask an attorney if the terms are unclear.
Two Roles: Financial and Healthcare
Most estate plans create two separate power of attorney documents, each granting different authority to potentially different people. Understanding which role you hold is essential.
| Financial POA | Healthcare POA | |
|---|---|---|
| What it covers | Bank accounts, investments, real estate, tax filings, bill payment, insurance, business operations | Medical treatment decisions, hospital admission/discharge, access to medical records, end-of-life care |
| When it activates | Document and state law determine whether authority begins immediately or upon a permitted condition | Typically only when the principal cannot communicate their own decisions |
| Who typically serves | Spouse, adult child, trusted friend, or professional fiduciary | Spouse, adult child, close friend who understands the principal's values |
| Ends when | Principal dies, revokes it, court revokes it, or agent resigns | Principal dies, revokes it, regains capacity, or agent resigns |
You may hold one role or both.
Some people name the same person as both financial and healthcare agent. Others separate the roles. If you hold both, keep clear records of which capacity you are acting in for each decision.
What You Can Do
The scope of your authority is defined by the POA document itself. A well-drafted POA grants broad powers so the agent can handle whatever arises.
Financial Management
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Access and manage bank accounts: deposits, withdrawals, transfers, bill payments
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Manage investment and brokerage accounts: buy, sell, rebalance, monitor
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File tax returns and communicate with the IRS on the principal's behalf
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Collect income: Social Security, pension, rental income, dividends
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Pay bills and debts: mortgage, utilities, insurance, medical bills
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Manage real estate: pay property taxes, maintain insurance, collect rent
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Apply for government benefits: Medicare, Medicaid, VA benefits
Legal and Administrative
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Access safe deposit boxes
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Manage insurance policies: file claims, maintain coverage
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Operate or manage a business owned by the principal
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Hire professionals: attorneys, accountants, financial advisors
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Sign contracts on the principal's behalf (within granted scope)
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Access digital accounts and manage digital assets (if authorized under RUFADAA)
Read the document carefully.
Not every POA grants all of these powers. Some are narrowly drafted. Others include specific limitations or require co-agent approval for large transactions. Before taking any action, confirm the specific power has been granted.
What You Cannot Do
A POA does not make you the owner of the principal's assets. You are a fiduciary, meaning you must act in the principal's best interest at all times.
Use the principal's assets for your own benefit
Every dollar must be spent for the principal's care, support, and financial obligations. Self-dealing is the most common basis for POA liability.
Make gifts unless explicitly authorized
Even continuing a pattern of holiday gifts requires documented authorization in the POA document.
Change the principal's will or trust
A POA does not grant authority to modify estate planning documents. Only the principal can do that while competent.
Override the principal's known wishes
If the principal is intermittently competent and expresses a preference, respect it unless doing so would cause harm.
Act after the principal's death
Your authority ends immediately. Transactions after death are invalid and potentially fraudulent.
Delegate your authority
You were chosen for your judgment. You cannot hand that responsibility to a third party unless the document permits it.
Commingle funds
The principal's money must be kept in accounts titled to the principal. Never deposit their funds into your personal account.
Fiduciary duty is personal liability.
If you breach your fiduciary duty, you can be held personally liable for losses, required to return improperly used funds, and face criminal prosecution. The standard is not "did you mean well" but "did you act as a prudent person would." Document everything.
Working with Institutions
Banks, brokerages, insurance companies, and government agencies each have their own procedures for accepting a power of attorney. Expect some friction. Institutions are cautious because they face liability if they honor a fraudulent or revoked POA.
| Institution | Typical Process | Tips |
|---|---|---|
| Banks | Submit POA for legal review (1-5 business days). May require their own POA form. | Submit before you need it. Bring original, certified copy, your ID. |
| Brokerages | Similar to banks. May require medallion signature guarantee. | Ask about acceptance policy in advance. Some firms have dedicated POA departments. |
| Insurance | Submit POA with claim form or policy change request. | Contact policyholder services directly. Request list of all policies. |
| Social Security | Does NOT accept private POAs. Must apply as "representative payee." | Visit local SSA office with POA, physician statement, and ID. |
| IRS | File Form 2848. Private POA alone is not sufficient. | File Form 2848 as soon as POA activates. |
If an institution refuses your POA.
Most states have laws that penalize institutions for unreasonably refusing a valid POA. Ask for the specific reason in writing. Common issues: the document is too old, lacks specific powers, or has not been notarized. Your attorney can help resolve disputes.
Record-Keeping
Detailed records are your best protection against accusations of mismanagement. If you cannot document a transaction, you cannot defend it. Treat every dollar as if you will be asked to explain it in court.
Every deposit, withdrawal, transfer, and payment. Include date, amount, payee, and purpose.
All income received: Social Security, pension, investment income, rental income.
All bills paid: mortgage, utilities, insurance, medical expenses, taxes. Keep receipts.
Any assets bought, sold, or transferred. Include reason, price, and professional advice relied on.
Communications with institutions, attorneys, accountants, and government agencies.
Your time spent on POA duties (supports any compensation claim).
Medical decisions made (if healthcare agent). Include date, decision, and reasoning.
Retain records for at least seven years.
Tax-related records should be kept for seven years. Real estate records should be kept indefinitely. If the principal dies, hand all records to the executor or successor trustee.
Healthcare Decisions
If you are named as the healthcare power of attorney agent, you make medical decisions when the principal cannot communicate their own wishes. This requires understanding what the principal would want, not what you would want.
Follow the advance directive
If the principal has a living will, it governs end-of-life decisions. Your job is to ensure those wishes are carried out.
Make decisions the principal would make
Apply "substituted judgment": decide as the principal would have decided based on their known values, beliefs, and prior statements.
Communicate with the medical team
Attend appointments. Ask questions. Once your authority is in effect, providers generally treat you as the principal's personal representative under HIPAA for the medical information relevant to your decisions. A separate HIPAA authorization covers anyone else the principal names.
Coordinate with family
Keep close family members informed. You are the legal decision-maker, but communication reduces conflict.
Document decisions and reasoning
Write down what was decided, why, and what the medical team recommended. This protects you if challenged.
The hardest conversations happen before the crisis.
If you have been named as someone's healthcare agent, have the conversation now. Ask: What does quality of life mean to you? Under what circumstances would you not want to be kept alive? These conversations are uncomfortable, but they are far less painful than guessing during a crisis.
Common Mistakes
Most POA agent errors come from good intentions paired with poor understanding of the rules.
Commingling funds
Never mix the principal's money with your own. This is the single most common mistake and creates the most legal exposure.
Making unauthorized gifts
Unless the document explicitly authorizes gifts and specifies terms, any gift from the principal's assets is a breach of fiduciary duty.
Failing to keep records
"I spent it on Mom's care" is not a defense without receipts, statements, and a transaction log.
Acting before authority activates
If you hold a springing POA, you cannot act until the triggering condition has been met.
Continuing to act after death
Your authority ends at death. Notify institutions immediately and transition to the executor or trustee.
Changing the estate plan
You cannot amend a will, change trust terms, or alter beneficiary designations unless specifically authorized (rare).
Not registering with institutions early
Waiting until a crisis to present a POA causes delays and sometimes outright rejection. Register early.
Failing to coordinate with other agents
If one person holds financial POA and another holds healthcare POA, you must communicate. Financial and healthcare decisions overlap constantly.
When to Call a Professional
You are not expected to be an expert in law, tax, finance, or medicine.
| Professional | When to Engage |
|---|---|
| Elder law attorney | POA interpretation, Medicaid planning, guardianship, disputes, real estate transactions |
| CPA / Tax advisor | Filing principal's returns, estimating obligations, gift tax implications |
| Financial advisor | Managing portfolio, coordinating access, consolidating accounts |
| Geriatric care manager | Coordinating medical care, evaluating facilities, handling Medicare/Medicaid |
| Insurance agent | Long-term care claims, maintaining coverage, filing health insurance claims |
Glossary
Agent (Attorney-in-Fact)
The person authorized to act on the principal's behalf under a power of attorney. Does not need to be a lawyer.
Advance Directive (Living Will)
A document stating the principal's wishes regarding end-of-life medical treatment. Works alongside the healthcare POA.
Durable Power of Attorney
A POA that remains in effect even after the principal becomes incapacitated. Without "durable," the POA terminates at incapacity.
Fiduciary Duty
The legal obligation to act in the principal's best interest, with loyalty, prudence, and transparency.
Healthcare Proxy
Another name for a healthcare POA agent, used in some states, including New York and Massachusetts.
HIPAA Authorization
A document authorizing named individuals to access the principal's medical records.
Incapacity
The inability to manage one's own affairs due to illness, injury, cognitive decline, or disability.
Principal
The person who creates the power of attorney and grants authority to the agent.
Representative Payee
A person appointed by SSA to manage Social Security benefits. Separate from a private POA.
Springing Power of Attorney
A POA that takes effect only when a triggering event (usually physician-certified incapacity) occurs.
If the principal has died and you are now serving as executor, see our companion Guide for Executors. If a trust is involved, see the Guide for Successor Trustees. For plain-language definitions of the legal terms used throughout this guide, see the estate planning glossary.