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Can my sister who lives out of state and I be POA medically and financially for my mom who has sun downers and dementia?

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It would be strongly advisable to retain an elder law attorney just to make sure you're "dotting all the i's and crossing all the t's".
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I am a power of attorney for two people in New Jersey. I live in Pennsylvania.

I do everything.
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I agree with Solis2014. In addition, in some cases "out of state" may simply mean a 5 or 10 minute drive over a state line.
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We are the responsible party for my BIL who lives in a NH1800 miles away. Never have had an issue. They call us when needed. He has no assets or other family so it makes it easy for us.
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I would disregard " cetude's" comment. It must come from an ill place.
You can definitely be POA or DPOA and live out of state despite your parents health.. I have been my parents DPOA for over 20 years (one of them with Alzheimer's) and have managed their care and finances from thousands of miles away. It has never been a problem. The DPOA was set up in their home state where they reside and my long distance address displayed in the paperwork..
If you have a good relationship with your sister and you can work together to provide the best care for your mother, then that's the ideal situation. One of you will have to be the primary and the other the secondary. Make the primary DPOA the one who is the most organized and willing to spend the most time dealing with financial and day to day issues. Those skills will come in handy. If you decide to make her the primary, you as a secondary can offer other forms of support locally to your mom that your other sister can't.
Good luck!
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Only lousy POAs  live out of state when it comes to Alzheimer's. In other words, totally useless. 
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From a legal perspective, there is no law in any state or U.S. territory that requires an agent/attorney-in-fact to reside in the same state as the principal.

I live in Ohio, and serve as agent for family members in California and Florida. It's never been an issue. I review at least 10 POAs a day for my company (I'm a legal professional for financial services) for customers, and I see plenty where the principal and agent live in different states. We do not refuse any POA if the two live in different states because it's not legal to reject on such a reason.

My standard disclaimer is feel free to consult with an attorney for drafting. Yes, you can do it yourself, but an attorney is going to be able to best advise your family what powers MUST be in that document so that you don't have surprises later, and make sure all of your documents are compliant with the state law, etc.  

Best wishes.
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I'd consult with an attorney who can explain the options, why some work better in certain circumstances and what it needs to be legal in that state. I wouldn't take a chance by doing one on your own. If you make a mistake, it's a mess and it may not be fixable, past a certain point.
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About the out of state part. It might depend on the wording of the POA. You would need to make sure it is effective in your moms state. Would your mom ever need it in your state or sisters? I'd say that might be hard to know should it prove too difficult to take care of her in her own state.
In that case, all you would need to do is make sure the POA is worded correctly for all states where you would need it. You should speak with an elder attorney and make sure you have it in good order. Her DNR form, her will, her end of life concerns, all of these things should be taken care of now. Some have reported that they had no problem. Others have indicated that they had problems with banks even when they had the correct POA for their state. So be sure to check with any financial institutions she uses (not yours-different rules in different banks) to see what is required and what her options are. 
Your mom will need to still be competent to sign this document in front of a notary so be sure to get this taken care of soon and properly. You will want it to be a DPOA and to clearly understand what you need to do in her state to activate the durable portion.
About there being more than one POA appointed.
I have been POA for three different people. I never had to show my POA, only had to say I was one. I'm sure there could be a time when that wouldn't work. On my parents POA all four of their living children were listed and could make decisions for them at any time. We never had a problem.
Problems came about with in-laws on exeuctors but not POA. In-laws POA was set up with eldest child in charge, then second, then third etc. They just wrote letters saying they didn't want the responsibility until it got to the level that was willing to take action and lived close enough.
My aunt had to redo her POA a few years ago as the second in line passed away. So, it is good to think in multiples in my opinion. Life happens to all of us, not just our parents.
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It should be only one person as poa with the other as contingent in case the poa is no longer willing or able to act.

It can be a confusing mess to coordinate between two people.
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