Power of attorney for finances: the document to do first

A power of attorney allows someone to act on your behalf in financial and legal matters.

The terminology varies — lasting power of attorney, enduring power of attorney, durable power of attorney, continuing power of attorney, mandate — and the essential feature is the same: it must be made while you have the capacity to make it.

This is the point that catches families out, repeatedly.

The capacity trap

A power of attorney is a document you grant. Granting it requires understanding what you are doing.

Once capacity is lost — through dementia, stroke, brain injury or serious illness — it is too late.

Families discover this when they try to sort out a parent's finances after a diagnosis and are told that nothing can be done.

What remains is a court process — deputyship, guardianship, conservatorship, depending on jurisdiction — which is slower, considerably more expensive, involves ongoing supervision and reporting, and gives the appointed person less latitude.

The difference in cost and difficulty between making a power of attorney and going through the court alternative is very large.

The general types

A financial power of attorney covers property and money — bank accounts, bills, investments, property transactions, benefits.

A health and welfare power of attorney, where the jurisdiction provides for one, covers medical treatment and care decisions. Covered separately on this site.

Some jurisdictions provide both, some only financial, and the rules on when each takes effect differ.

When it takes effect varies. Some can be used immediately on registration, with the donor's permission. Some take effect only on loss of capacity.

Immediate effect is useful practically — an attorney can help with banking while the person is still capable but finding it difficult — and it requires trusting the attorney sooner.

Choosing an attorney

The person will have access to your money. This is the decision that requires the most care.

Trustworthiness above everything.

Financial competence. The role involves managing accounts, bills, investments and sometimes property transactions.

Availability and proximity. Practical banking is easier for someone nearby.

Willingness. Ask them.

Consider appointing more than one, and specify whether they act jointly — all must agree — or jointly and severally, where any can act alone.

Jointly provides a check and risks paralysis. Jointly and severally is practical and provides no internal check. Many people specify jointly for major decisions and severally for routine matters, where the jurisdiction permits it.

Name replacements in case the first cannot act.

The abuse problem

Financial abuse of older people by attorneys is documented and not rare. Regulators and public guardians in various jurisdictions investigate cases regularly.

Safeguards worth considering:

Appointing more than one attorney, jointly for significant decisions.

Requiring accounts to be provided to a third party — another family member, a solicitor — at intervals.

Including restrictions in the document, such as prohibiting gifts or requiring consultation before selling property.

Choosing someone with no financial pressures of their own, where possible.

Telling the wider family who has been appointed, which introduces informal scrutiny.

Attorneys generally have fiduciary duties: to act in the donor's best interests, to keep the donor's money separate from their own, to keep records, and not to profit from the role beyond permitted expenses.

The practical steps

Find out what document exists in your jurisdiction and what the process is.

Many jurisdictions require registration with a public authority before the document can be used, and registration can take weeks or months. Doing this in advance rather than at the point of need matters.

Some require a certificate from an independent person confirming capacity and absence of pressure.

Provide copies to banks and institutions in advance where they will accept them, since institutions frequently have their own processes and delays.

The conversation to have

The document confers authority. The conversation tells them what to do with it.

Where your accounts are. What regular payments exist. Who your adviser, accountant and solicitor are. What you would want done with property. Your views on care costs and on selling the house. Whether you would want gifts made to family, and to what extent.

That last one matters, because attorneys are frequently restricted in making gifts, and family members frequently expect them to continue existing patterns of giving.

When to do it

Now, if you are an adult with any assets.

The assumption that this is for old age is the reason people leave it too late. Capacity can be lost suddenly at any age through accident or illness, and a young family with a mortgage and no power of attorney faces genuine difficulty if one partner is incapacitated.

Joint accounts help and do not cover everything — a jointly owned house cannot be sold, a mortgage cannot be renegotiated, and a business cannot be managed without authority.

If capacity has already been lost

The court route is available and it works, and it takes months, costs considerably more, and involves ongoing supervision.

Get advice early rather than trying to manage informally, since acting without authority can cause problems with banks and can expose you personally.

This is general information, not legal advice. The documents available, their names, registration requirements and legal effect differ substantially by jurisdiction. Consult a qualified solicitor or attorney where you live.