Power of attorney and finances — when you need to take over the money

This article is for educational purposes only and does not constitute medical, legal, or financial advice. Every family situation is different, and you should consult with appropriate professionals about your specific circumstances.

Your parent is still in their own home but memory issues are getting worse. You've started helping with bills, reminding them about doctor appointments, and checking that they're not being taken advantage of by anyone. One day you realize you have no legal authority to do most of this. The bank won't talk to you about your parent's accounts. You can't sign documents for your parent without forging their signature. You can't authorize medical procedures. You're helping your parent manage their life, but legally, you're invisible.

This is where a power of attorney comes in. A POA is a legal document that says your parent wants you to have authority to act on their behalf, usually regarding finances. It's one of the most important documents your parent can create, and also one of the most misunderstood. Many older adults have never heard of it. Some think it's complicated and too expensive to bother with. Some are afraid of signing away their control. Some know they need one but don't know what kind or what to do with it.

The thing about powers of attorney is that they exist whether you plan for them or not. If your parent doesn't have a power of attorney document and becomes unable to manage their own finances, your only option is to ask a court to appoint you as guardian or conservator. That's expensive, time-consuming, and public. A properly prepared power of attorney avoids all of that. It gives you authority without court involvement. It protects your parent by being their choice, not the government's choice.

If your parent is starting to show signs that they can't manage finances as well anymore—missed bills, confusion about accounts, unusual spending, or just feeling overwhelmed—a power of attorney is something to discuss now. While your parent still has full mental capacity, they can sign a POA. Once they lose capacity, it's too late. They can't sign legal documents anymore, and a document signed when they're not competent isn't valid. Creating a power of attorney should happen when your parent doesn't urgently need it yet. It's insurance that you hope you never need, but you'll be grateful you have it if you do.

Why This Document Matters

A power of attorney protects your parent by making sure that if they become unable to manage finances, someone they trust has the authority to do it. Without a POA, if your parent can't pay bills or manage accounts, you have to go to court. A judge has to agree that your parent is incapacitated and that you should be given authority. That process can take months. During that time, bills pile up. Accounts might close or fees might be charged. The court might appoint someone other than who your parent would have chosen. It's the exact opposite of what your parent would want.

A power of attorney also shows authority without creating confusion. When you try to pay a bill for your parent or access their account and the bank says they need authorization, you can show them the power of attorney document. It's a clear, legal statement that your parent has given you permission. No guesswork. No questions about whether you're authorized. The document does the talking for you.

For your parent's care situation specifically, a power of attorney matters a lot. If your parent needs to move to assisted living, someone needs to authorize that, sometimes with legal paperwork. If your parent needs to sell assets to pay for care, you need authorization to do it. If your parent gets bills for medical care or care facilities, you need to be able to access their accounts and approve payment. A power of attorney makes all of this possible without having to go back to court every time something comes up.

A power of attorney also prevents family conflict. If your parent has multiple adult children and doesn't have a power of attorney naming someone, what happens if your parent becomes incapacitated? All of your parent's children probably have equal legal rights to be appointed as guardian. If you think you should be the one managing finances but your siblings disagree, you end up in court fighting about it. A power of attorney eliminates that fight. Your parent has already decided. It's not up for debate.

There's also the issue of elder financial abuse. One of the biggest risks older adults face is financial exploitation by family members or friends. A power of attorney could potentially be used for this if the wrong person has it. But a proper power of attorney with checks and balances protects against this. If you're named as agent, you have a fiduciary duty,a legal obligation to act in your parent's interest, not your own. That duty is enforceable. If you misuse the power of attorney, you can be held responsible legally.

What It Does

A financial power of attorney gives you authority to act on your parent's behalf regarding money and property. What exactly you can do depends on what the document says. Some powers of attorney are broad, giving the agent authority to handle all financial and property matters. Others are narrow, limiting authority to specific things like paying bills or managing bank accounts. Your parent gets to decide.

The most common version is a durable power of attorney. The word "durable" means it remains in effect if your parent becomes incapacitated. That's the whole point. You want a power of attorney that doesn't stop being valid just because your parent had a stroke or developed dementia. A non-durable power of attorney ends if your parent becomes incapacitated, which is useless for your purposes.

There's also the question of when the power of attorney takes effect. A standard power of attorney becomes effective as soon as your parent signs it. That means you can use it immediately. A springing power of attorney only becomes effective if your parent becomes incapacitated,it "springs" into effect when needed. Springing POAs sound good because they don't give you authority until you need it. The problem is determining when your parent is actually incapacitated. It usually requires a doctor's certification, which takes time. By the time it's certified, there might be urgent bills that need paying. Most elder law attorneys recommend standard POAs that are effective immediately but include safeguards to prevent abuse.

A power of attorney is not the same as making someone a joint owner on accounts. With a power of attorney, you have authority to act, but your parent is still the legal owner of everything. This matters for taxes, benefits, and liability. If your parent's house is titled in your parent's name and you have power of attorney, you can sell the house on your parent's behalf, but you don't own it. If your parent is sued, they're responsible, not you. If your parent gets Medicaid benefits, the house is your parent's asset, not yours,though power of attorney to sell it could be important in planning for Medicaid.

A power of attorney is also different from a will. A will says who gets your parent's property after death. A power of attorney says who manages it while your parent is alive. They serve different purposes and both are usually necessary.

Powers of attorney are subject to limitations and rules that vary by state. Some states have specific forms that are recommended. Some states have specific language that needs to be included to make the power of attorney effective at banks and institutions. An online form or template might work, but there's real risk that it won't be accepted by financial institutions. You want a power of attorney that actually works when you need it, not one that financial institutions refuse to recognize.

Getting It Done

A power of attorney needs to be prepared correctly or it might not be valid. The minimum requirements vary by state, but typically your parent needs to be legally competent, the document needs to be signed and dated, and it often needs to be witnessed or notarized. Some states require just witnesses. Some require a notary. Some require both. Some require it to be in a specific form.

The best approach is to have an attorney prepare the power of attorney. Elder law attorneys specialize in this. They know what your state requires. They'll ask your parent what authority they want to give you. They'll make sure your parent understands what they're signing. They'll have it witnessed or notarized properly. They'll explain limitations and duties. The cost is usually $200 to $500, sometimes more, depending on the complexity. For something this important, paying for professional help is worth it.

If cost is a concern, some websites offer templates for much less. Legal Zoom, Rocket Lawyer, and similar services offer forms that are sometimes adequate. The problem is that online forms might not match your state's requirements. A power of attorney that's not valid is worthless. If you use an online form, have an attorney review it before your parent signs it. That might cost $100 to $200 instead of $500, and it protects against the document being invalid.

Your parent can't just sign a power of attorney alone. Witnesses are usually required. Different states require different numbers of witnesses and might have rules about who can't be a witness (usually can't be the agent,the person you're giving authority to,and can't be spouse or adult children in some states). An attorney will help with this. If you use a template, make sure you follow the witness requirements exactly or the document might not be valid.

Your parent also needs to understand what they're signing. The document should be clearly explained before they sign it. Your parent should understand that this gives you significant authority. They should understand that once signed, you can act on their behalf. They should understand that it continues even if they become incapacitated. If your parent signs while confused or under pressure, the document might be challenged later and found invalid. Your parent's clear understanding and voluntary choice is essential.

Once the power of attorney is signed, make copies. Give one to your parent to keep. Give one to any financial institutions your parent uses. Keep one yourself. Some people have the notary make certified copies, which some institutions prefer. Store the original somewhere safe, like with your parent's important documents or an attorney's office. You don't want to lose it, but you also don't want it lying around where someone could forge using it.

Tell your parent's financial institutions that they now have authority under the power of attorney. Some banks will add you as an authorized user on accounts so you can do things like access statements and pay bills online. Some require you to show the power of attorney document and they'll work with you without adding you as an official user. It varies by institution, and it's worth calling ahead and asking what their process is.

Using It Properly

When you actually use the power of attorney, you're representing your parent. You're not representing yourself. Decisions you make and money you spend should be for your parent's benefit, not your own. This is a fiduciary duty. You could be held responsible legally if you misuse it,spending your parent's money on yourself, for example, or investing it in risky ventures for your own benefit.

Keep records of what you do. If you pay bills, keep the documents. If you move money, document it. If you make investments, record them. If something is ever questioned later, you want to be able to show what you did and why. This is your protection and your parent's protection.

When you present the power of attorney to a financial institution, expect to sometimes be questioned. Some institutions are cautious about powers of attorney because they don't want to be accused of allowing elder financial abuse. They might ask you to prove your identity. They might ask your parent to verify that the power of attorney is real and that you do have authority. They might require specific documentation or a specific version of your state's power of attorney form. Be patient. This caution protects your parent, even if it's inconvenient for you.

If an institution refuses to recognize a valid power of attorney, you can escalate. Talk to a manager. Ask why they're refusing. Get the reason in writing. If the power of attorney is truly valid and they're still refusing, an attorney can help push back. Sometimes threatening legal action is enough. Most of the time, institutions will accept a valid power of attorney if you're persistent and professional about it.

Your power of attorney ends if your parent dies. After death, you're no longer the agent. If there's a will, the executor of the will handles financial matters. If there's no will, the person appointed as administrator handles it. The power of attorney is done.

A power of attorney is one of the most practical protections you can create for your parent. It's not as dramatic as a will or a medical directive, but it's often more important because it determines who handles your parent's day-to-day financial life if your parent can't. Creating it early, while your parent is competent and before there's a crisis, means you're prepared for whatever comes. When your parent's health or memory changes, you're already authorized. You can act quickly. You don't have to go to court. You don't have to fight with siblings. You can focus on what matters,your parent's wellbeing, not bureaucratic processes.

How To Help Your Elders is an educational resource. We do not provide medical, legal, or financial advice. The information in this article is general in nature and may not apply to your specific situation. If you are concerned about a loved one's cognitive health or safety, consult with their healthcare provider or contact your local Area Agency on Aging for guidance and support.