Why would someone need a power of attorney?

A power of attorney for finances can be used to ease the burden of handling financial affairs. The document can allow the appointed person -- called an "agent" or "attorney-in-fact" -- to handle everyday financial matters such as rent, insurance, and doctors' bills, as well as major matters such as sale of assets or the management of a business, property, or investments. Many people also choose to limit the power of attorney, keeping major decisions for themselves as long as they're mentally competent.

A power of attorney can also serve to protect older adults if and when they become incapacitated. If someone doesn't have a power of attorney and becomes unable to handle financial affairs -- because of an illness, dementia, or stroke, for example -- a court might need to appoint an individual (known as a guardian or conservator) to act on the person's behalf. Such court proceedings are expensive and time-consuming, and the person in your care might not wind up with someone he would want to act on his behalf. A properly executed durable power of attorney avoids all this.

• Is a power of attorney always necessary?

Under a few circumstances, a power of attorney isn't necessary. For example, if all of a person's assets and income are also in his spouse's name -- as in the case of a joint bank account, a deed, or a joint brokerage account -- a power of attorney might not be necessary.

Many people might also have a living trust that appoints a trusted person (such as an adult child, other relative, or family friend) to act as trustee, and in which they have placed all their assets and income. (Unlike a power of attorney, a revocable living trust avoids probate if the person dies.)

But even if spouses have joint accounts and property titles, or a living trust, a durable power of attorney is still a good idea. That's because there may be assets or income that were left out of the joint accounts or trust, or that came to one of the spouses later. A power of attorney can provide for the agent -- who can be the same person as the living trust's trustee -- to handle these matters whenever they arise.