The plan is for us to have minds like a razor for the rest of our lives. That said, protecting our family sometimes means hoping for the best while planning for the worst.
That’s where power of attorney can be helpful, in addition to other estate planning such as a last will and testament.
Power of attorney documents let someone make legal and financial decisions for you if you can’t. There are many different types of power of attorney agreements.
You might choose to put a power of attorney in place for yourself, just in case. Additionally, if you have aging parents or other relatives, you might encourage them to set up power of attorney while they’re still able.
And yes, married couples often need POA, too, even if they have joint accounts! We'll break down your questions, from "what is POA?" to "who can override a power of attorney?" and "how do I get a power of attorney?"
People ask us a lot for the definition of a POA: A power of attorney document names someone (called the “agent”) to make legal decisions on another person’s behalf (the “principal”) if the person is not able to. For example, if you got into an accident that left you in a coma, or if you suffered from dementia, this would enable someone else to step in and manage your affairs and your property.
The catch is, the document needs to be in place before you’re declared legally incompetent to make decisions for yourself.
You can name multiple agents on a POA document. Often, this means a top choice and a few alternates, although you can specify multiple people who have to work together as co-agents (such as multiple adult children).
If you’re interested in naming co-agents (or if you’re named along with someone else on a relative’s POA), make sure the document answers these questions:
Can co-agents act independently, or do all of them need to agree on every decision?
What happens if a co-agent isn’t responding promptly regarding a certain decision or document?
Is there language in the POA to settle disputes between agents? What happens if co-agents can’t resolve a dispute?
Generally speaking, you can get a power of attorney by having a lawyer draft these documents for you. POA documents can take multiple forms. Let’s jump into the main types you should know about.
Again, having legal access to your account doesn’t mean your POA agent has more power than you, or that they can do anything they want with your money. POA power isn’t like being co-owner of a joint account, for example. If you and an agent disagree over a financial decision, your decision governs (although, to be fair, if they have already made a POA-authorized purchase, you may need to go through some hurdles to get that money back).
Your agent can’t swoop in and take over simply because you’re making decisions they disagree with, and you can revoke their power in writing anytime you want.
Forgetting you’ve named someone as your agent may not be as serious of a risk as it sounds, because financial institutions often take a conservative approach to working with an agent.
An outdated POA, or a major event like a divorce (if your spouse was your agent), is often a red flag for a bank. If the financial institution suspects that something’s amiss, they can and often will refuse to honor the POA. It’s often recommended that you review any POAs on the timeline your attorney suggests, so you can make updates.
Working with an attorney who has plenty of experience writing POA documents is also a major part of setting up the right balance of restrictions and access for your agent. These documents are understandably complicated, and having a clearly articulated plan goes a long way toward outlining the kinds of decisions you want your agent making on your behalf.
Just about anyone with financial assets should consider a POA. The possible exception might be single people who don’t own a home and don’t support anyone financially. But even then, having a POA could enable someone you trust to dictate the use of your funds to manage your care if something happened to you.
If you’re married and share joint financial accounts with a spouse, you still need to draw up a POA document. In fact, it can be even more critical.
“Most financial institutions won’t allow one of the owners to simply take out all the money or close account. They want both people or someone who has POA,” says Evan H. Farr, certified elder law attorney. “With real estate, you always have to have both people involved. Even if they had no bank account and their only asset was the house, you need POA.”
If you’re in a coma, or you have a stroke that leaves you mentally unable to make legal decisions, your spouse may decide it’s best to downsize to a smaller house, for example. Without POA, they can’t simply do it.
Instead, they’d have to go through what Farr calls, “The lovely and wonderful nightmare of living probate—lovely and wonderful for the attorneys who make tons of money on it, and a nightmare for the people involved.”
Your spouse, parents or whoever will handle legal and financial matters would have to go to court to petition for you to be declared legally incompetent. Once that happens, the court would name a guardian (responsible for your personal and health-related care) and a conservator (responsible for your finances). These can be the same person, and the terms used to describe this role vary by state.
From there, the conservator has to file annual accountings of the money coming in and out of your accounts. These need to be accurate to the cent, or the probate court may not accept the records. At that point, even more legal proceedings could come into play.
Figuring out POA spares your loved ones from going through a time-consuming, labor-intensive legal process at a time when they already have a lot to worry about.
Fabric exists to help young families master their money. Our articles abide by strict editorial standards.
Fabric by Gerber Life exists to help young families master their money. Our articles abide by strict editorial standards.
Information provided is general and educational in nature and is not intended to be, and should not be construed as, financial, legal, or tax advice. Laws of a specific state or laws relevant to a particular situation may affect the applicability, accuracy, or completeness of this information. Federal and state laws and regulations are complex and are subject to change. We make no warranties with regard to the information or results obtained by its use, and disclaim any liability arising out of your use of, or reliance on, the information.
Fabric by Gerber Life offers a mobile experience for people on-the-go who want an easy and fast way to purchase life insurance.
If a family member names you as his or her POA agent, here are some things you’ll want to discuss beforehand.
There are a number of different types of POA, which vary according to how much control they grant the agent, how long they last and when they take effect.
We'll explain some of the things a will doesn't cover and special situations to be alert for.
Pre-existing conditions can make getting life insurance more challenging, but you may still have coverage options. This is how insurers look at common health conditions.
Term Life Insurance Policy Series ICC22 2205-4004 WSA and Accelerated Death Benefit Rider policy series ICC22 2205-2623 WSA (and state variations where applicable) issued by Western-Southern Life Assurance Company, Cincinnati, OH which operates in DC and all states except NY, and distributed by Gerber Life Agency, LLC using Fabric Technologies. Gerber Life Agency, LLC is an affiliate of Gerber Life Insurance Company (est. 1967). All are members of Western & Southern Financial Group (Western & Southern). Issuance of coverage for Term Life Insurance is subject to underwriting review and approval. Please see a copy of the policy for the full terms, conditions and exclusions. Product provisions, availability, definitions and benefits may vary by state. Payment of benefits under the life insurance policy is the obligation of, and is guaranteed by, the issuing company. Guarantees are based on the claims-paying ability of the issuer. Products are backed by the full financial strength of the issuing company.
All sample pricing is based on a 30-year old F in Excellent health for the coverage amount shown and a 10-year term policy, unless otherwise stated. Gerber Life Agency, LLC (GLA) is an insurance agency licensed to sell life insurance products. GLA will receive compensation from Western-Southern Life Assurance Company for such sales. The NAIC Company Code for Western-Southern Life Assurance Company is 92622.
Western-Southern Life Assurance Company's A+ Superior A.M. Best Rating: Superior ability to meet ongoing insurance obligations (second highest of 13 ratings; rating held since June 2009). Ratings are subject to change from time to time. The ratings shown here are correct as of 09/03/2022. For more information about a particular rating or rating agency, please visit the website of the relevant agency.
Plan like a parent. is a trademark of Fabric Technologies, Inc.
Gerber Life is a registered trademark. Used under license from Société des Produits Nestlé S.A. and Gerber Products Company.
In the State of California, Gerber Life Agency, LLC is known as and does business as Gerber Life Insurance Agency, LLC.