Power of attorney, capacity and dementia: the documents, the timeline, and the decisions to make while you still can

• An enduring, lasting or durable power of attorney keeps working after the person loses capacity; an ordinary power of attorney ends at that moment.

• Capacity is assessed decision by decision at the time of the decision; a diagnosis of dementia does not by itself remove it.

• Without a capacity document, every country routes the family to a court or tribunal for guardianship, deputyship or an administration order, which takes months, costs thousands, and is public.

A document in which you give another person authority to act for you. A general power covers money while you can still act yourself and ends if you lose capacity. The enduring kind, which is the one that matters, is made for that loss: it continues, or begins, when you can no longer decide. Health and personal decisions usually need a separate instrument: a health directive, a health-care proxy, an enduring guardian. Most instruments can be limited (to a property, a period, a purpose), conditioned (springing into effect only on a doctor's certificate), and shared (two attorneys jointly, or jointly and severally).

The ability to understand the information relevant to a decision, retain it long enough to weigh it, and communicate a choice. It is specific to the decision and to the moment: the capacity to sign a will (the 1870 test from Banks v Goodfellow, still used in the common-law world: understand what a will does, roughly what you own, and who might expect to benefit, without a disorder of the mind distorting the choice) is different from the capacity to manage a portfolio, and both can be present on a good morning and absent by evening. The capacity to make a power of attorney is assessed the same way: understand what the document does, what powers it gives, and that the attorney could misuse them. A capacity assessment by a doctor at the time of signing, recorded in a letter kept with the document, is the cheapest insurance a family can buy against a later challenge.

Slowly and then suddenly. The decline usually begins years before the diagnosis; the diagnosis often arrives at the point where documents can no longer safely be made; and the family's first conversation about powers of attorney tends to happen in the week after. The planning window is the years before, when the person is well and the documents feel unnecessary. Anyone over sixty should sign them now; anyone with a family history of dementia, earlier. A person with an early diagnosis can often still sign, and should, quickly, with the doctor's letter.

An attorney for property can operate accounts, pay bills, manage investments, deal with the tax office and, in most places, sell the home. An attorney cannot make or change the person's will, cannot usually make gifts beyond what the document allows and the law permits (the OPG in England requires court approval for anything beyond customary gifts; Australian states cap gifts at what the person could reasonably have been expected to make), cannot change beneficiary nominations in most countries, and cannot act for their own benefit. A health attorney or guardian can consent to or refuse treatment, choose where the person lives, and decide who visits, within any advance directive the person left. Neither can overrule a written directive about treatment the person made while capable.

Honesty first, competence second, geography third. Most financial abuse of older people is by family, and most of it starts with the document. The safeguards are ordinary: two attorneys jointly for large decisions, a duty to keep accounts, a named third person who can see them, the bank told who holds the authority, a gifting limit written into the instrument, and the reasons for the choice written down so it cannot be quietly reversed. A professional attorney (a trustee company, a solicitor) is the right answer where the family cannot agree or where the estate is large, at a cost of one to two percent a year.

The family applies for a substitute decision-maker: guardianship or conservatorship in a US state court; deputyship through the Court of Protection in England (months, £421 to apply, annual supervision fees); a financial management and guardianship order from the state tribunal in Australia (NCAT, VCAT, QCAT), which is faster and free but appoints the Public Trustee where the family is in conflict; a committeeship or guardianship in Canada; a deputy under the Mental Capacity Act in Singapore; guardianship through the Family Court in Israel. All are public, all take months, and none asks the person who they would have chosen.

An attorney decides what you can no longer decide. An attorney cannot know what you would have decided unless you said. Where you want to live when you cannot choose. What a good day looks like. What you would refuse. Who should be listened to and who should not. Whether the business is sold. These are the questions the attorney will be asked, and the honest ones will say they are guessing.