A power of attorney is a legally binding document that lets someone else (an agent) act for you (the principal) in the event that you’re not able to do so yourself, whether you’re incapacitated or you’ve passed away. The person you appoint can be anyone: a lawyer, a nurse or a friend or relative you trust.
But while a power of attorney is responsible for major decisions on your behalf — like where your belongings go after you pass — there are some things they aren’t responsible for, including much of your debt.
Is power of attorney responsible for debt?
When you die, your debt dies with you. That means your power of attorney agent isn’t responsible for your debt unless:
- They were a co-signer on a loan with you.
- They hold a joint account with you.
- They’re a spouse and the state you live in requires they repay some of your debt.
Depending on where you live, other exceptions could apply.
What is the purpose of a power of attorney?
A power of attorney isn’t a person, but rather a legal document that gives someone the power to act on your behalf in case you die or become incapacitated. You can appoint someone to make decisions for you when you can’t, whether it’s in regards to your health care, finances or other assets.
A financial power of attorney can come in handy in a couple of ways. For instance:
- A service member is deployed overseas: A financial POA can manage a service member’s property and pay their bills while they’re away.
- Future estate planning: A POA can help plan for any potential events in the future, like a debilitating brain injury or dementia. This person can handle the principal’s affairs in advance and can take their place if they can’t do so themself.
Can a power of attorney write checks to themselves?
There are some limitations to the power of attorney, especially when it comes to money.
A power of attorney does allow the agent to accept checks on behalf of the principal, but they can’t write personal checks from the principal to themselves. However, they can accept checks from:
- Doctors and health care companies.
- Brokerage firms and investment companies.
- Other types of businesses.
Additional things to consider
If you’re planning to appoint a power of attorney, keep in mind the capacity your agent will be working in. Stay safe and remember:
- Appoint someone you trust: A POA shouldn’t be with someone you’ve never met. You should create a power of attorney with a lawyer, nurse, friend or relative with mutual trust. If you’ve only known someone a short time, you might not be working with someone who has your best interest in mind.
- Power of attorney fraud is real: If you don’t do your homework, your potential agent could create a forged POA document or give themselves more power than you’d like to hand over. Power of attorney abuse means that they can have access to your bank and other financial assets, possibly depleting them.
- Tell others about your POA: Don’t keep your power of attorney between you and your agent. Instead, share the name of your agent with others. Tell your doctors, relatives and others that you’ve appointed this person. That way, others can keep tabs on this person’s actions.
- A power of attorney is flexible: You can make changes to your power of attorney, revoke access or cancel your POA anytime if you feel that your agent isn’t working in your best interest.
- An extra barrier might be helpful: You can require in your power of attorney document that your agent report to another person when making financial transactions, like paying bills or selling property.
Since a power of attorney agent has the potential to abuse their power, it’s important to take safety precautions before and during the process of creating a POA. Take steps to protect yourself now to avoid fraud later on.