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Power of Attorney Explained: Choosing the Right One for Your Needs

Writer's picture: Peter Newman, CFA®Peter Newman, CFA®

Choosing the right Power of Attorney (POA) is one of the most important decisions you’ll make in your estate plan. A POA grants someone the authority to make financial or medical decisions on your behalf when you cannot take action on your own. Depending on your needs, there are various types of POA, each with unique responsibilities.



Two hands gently hold an elderly hand in a warm setting, showing tenderness and care. The elderly person wears a knitted sweater.
When drawing up powers of attorney, older parents will most likely name adult children as their representatives. But is that always the right choice?

Here's a guide to help you understand the differences:


Financial POA.

This grants authority to manage financial matters, such as paying bills, managing investments, filing taxes, and selling property. A financially literate individual or professional fiduciary is often the best fit for this role.


Healthcare POA.

A healthcare POA makes medical decisions on your behalf if you're unable to do so. This person should be familiar with your healthcare preferences and comfortable advocating for your wishes. It’s helpful if the individual has strong communication skills and the ability to collaborate effectively with family members, legal professionals, or medical staff.


Durable POA.

A durable POA becomes effective immediately upon signing, unless otherwise specified. It remains in effect even if you become incapacitated or unable to make decisions for yourself. 

The Durable POA is ideal if you want someone to act on your behalf right away, or you want to ensure your affairs are managed seamlessly in case of incapacitation.

Springing POA.

A springing POA only becomes effective upon a specific event, typically when you are declared incapacitated by a physician or other defined criteria.The "springing" aspect refers to the triggering event that activates the POA.This is ideal if you want to retain full control until a clear event, such as incapacitation, occurs. 


A Durable POA offers simplicity and continuous authority. However, this requires absolute trust in your chosen agent, as they can act on your behalf at any time. In contrast, a Springing POA only takes effect after a specific event, such as incapacitation, which can give you greater control. Keep in mind, though, that this added control may result in delays, as the triggering event often requires documentation, like a doctor’s certification, to activate the POA.


Choosing the Right Individual

Selecting the right type of POA and the appropriate individual is essential to ensure your financial and healthcare decisions align with your wishes. 


Here are three important qualities to look for in a Power of Attorney (POA):


1. Trustworthiness

The most critical quality is absolute trust. Your POA will have legal authority to make decisions on your behalf, whether financial, medical, or both. Choose someone with integrity who will act in your best interests, even under pressure or in challenging circumstances.

2. Dependability and Availability

Your POA should be reliable and available to act when needed. They should be willing to take on the responsibility and capable of responding quickly to situations that may arise, particularly in emergencies. You should consider geographic proximity when selecting a POA.

3. Good Judgment and Financial/Medical Literacy

A POA must make informed decisions, often under complex circumstances. For a financial POA, the person should understand basic financial principles and have sound judgment about money. For a healthcare POA, they should be comfortable discussing medical decisions and honoring your healthcare preferences.


Take Action on Your Estate Plan

If you’re working on your estate plan this year, let us help you navigate your options and choose the right POA to fit your needs. Download our Estate Planning Checklist or consult with our team at Peak Wealth Planning.



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About the Author

Peter Newman is a Chartered Financial Advisor (CFA®) and president of Peak Wealth Planning. He works with individuals nationwide that have accumulated wealth through company stock, ESOP shares, real estate, or running a business. Peter applies his unique background to help clients achieve their specific goals and enjoy peace of mind.


Peak Wealth Planning offers personalized concierge services to meet your wealth management needs, including financial planning, investment management, ESOP diversification, retirement income, insurance, and estate planning. As a fee-based financial advisor based in Chicago, Peak Wealth Planning serves a select group of clients in Illinois and across other states.




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