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Power of Attorney Rights and Limitations - What You Need to Know

What are the limitations for Power of Attorney? What do they have a legal right to do? Trust & Will answers all your questions about POA rights.

Patrick Hicks

Patrick Hicks, @PatrickHicks

Head of Legal, Trust & Will

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Nominating a Power of Attorney is a crucial aspect to any Estate Plan. After all, this allows someone to make medical, financial, and other important life decisions on your behalf in the event you are unable to do so. It is important to choose someone you trust for the role, and for them to accept the responsibility. 

As you consider who to select, it can be helpful to understand the power of attorney rights and limitations. This will help illustrate exactly what your POA can and can’t do -- which can help provide more context as you begin Estate Planning. Keep reading to learn more about the following: 

How Does Power of Attorney Work?

Power of Attorney works by allowing someone to make important decisions on your behalf, should you become incapacitated or medically unable to do so. The purpose of officially nominating a POA is to ensure that someone can act on your behalf in a timely manner should they ever need to. Without a POA, your family will typically have to go to court to appoint a guardian to handle these duties. 

There are a few different types of POA, but the nomination process for each is similar. You can start by creating a valid Will online and then nominating a Power of Attorney using a state standardized form. They are tasked with putting your needs above their own, making it crucial to select a trusted individual for the role. Once signed and notarized, this paperwork will allow your POA to take action if certain conditions are met. 

What Rights Does a Power of Attorney Have?

A Power of Attorney, often referred to as the Agent, has the right to make important life decisions on behalf of the person who nominated them, referred to as the Principal. Here are just some of the power of attorney duties: 

  • The right to make healthcare decisions, including diagnostics and continuing or stopping medical treatments. 

  • The right to select and hire doctors or caregivers. 

  • The right to decide on long-term living arrangements as they relate to medical care. 

  • The right to open a lawsuit on behalf of the Principal and sign any necessary legal documents.

  • The right to receive certain forms of income on behalf of the Principal. 

  • The right to make personal, business, or investment-related financial decisions.

  • The right to open bank accounts, write checks, or sell property for the Principal. 

  • The right to purchase life insurance policies for the Principal. 

What Are the Limitations of Power of Attorney?

While a Power of Attorney has robust legal rights when it comes to managing the affairs of the Principal, there are certain limitations to be aware of. These limitations are in place to help regulate the role of POA: 

  1. The POA cannot transfer the responsibility to another Agent at any time. 

  2. The POA cannot make any legal or financial decisions after the death of the Principal, at which point the Executor of the Estate would take over. 

  3. The POA cannot distribute inheritances or transfer assets after the death of the Principal. 

  4. The POA cannot change or invalidate your Will or any other Estate Planning documents. 

  5. The POA cannot change or violate the terms of the nominating documents -- otherwise they can be held legally responsible for fraud or negligence. 

  6. The POA cannot act outside of the Principal’s best interest. 

  7. The POA cannot make decisions before the document comes into effect -- conditions will be outlined with approval of the Agent and Principal. 

  8. The POA cannot be officially nominated unless the Principal is of sound body and mind. 

  9. The POA cannot use the Principal’s assets or money as their own. 

  10. The POA cannot take compensation beyond what is outlined within the POA agreement. 

Common Questions About Power of Attorney Rights

The Power of Attorney rights and limitations exist to ensure both parties understand exactly what the role entails. However, there are a few gray areas that may require more context to understand: 

Can a Power of Attorney Transfer Money to Themselves?

A Power of Attorney can transfer money to themselves if it is outlined in the original agreement or when the POA is acting in the Principal’s best interest. Unfortunately, situations do happen where a POA takes advantage of their legal rights by transferring funds beyond what is specified to themselves. In these cases, POA can be revoked and legal action can be taken by the Principal or a family member. 

There are a few ways to ensure the Principal’s best interests are protected at all times. First, it is crucial to select a trusted individual for the role. Many people choose a spouse, child, or sibling. Once you know who you would like to select, review your documents with a qualified Estate Planning lawyer to ensure the responsibilities and limitations are clear. 

For example, if you only want a POA to make medical decisions on your behalf you can include that when nominating them. There are several Power of Attorney types to choose from to meet various legal, financial and medical needs. The most important thing is to understand when each role begins and ends. 

Can Two People Have Power of Attorney?

Two people or more can have Power of Attorney, though it is generally advised against. Nominating more than one POA can create confusion when it comes time to make important decisions -- especially with time-sensitive medical decisions. However, if you want different individuals to handle different responsibilities you can nominate a different type of POA. 

There is one main exception to nominating more than one POA. For older couples who want to choose their spouse, it may be a good idea to name a second Agent. That way, if anything were to happen to both of you someone else could step in. A common arrangement is to nominate a spouse and child as POA.

Conclusion 

A Power of Attorney is an important addition to any Estate Plan. This is the person who will take over medical care, financial management, and other important decisions in case you become unable to do so. Understanding the Power of Attorney rights and limitations can help make expectations clear as you navigate this process. Is there a question here we didn’t answer? Reach out to us today or Chat with a live member support representative!

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