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The person living with dementia maintains the right to make his or her own decisions as long as he or she has legal capacity. Power of attorney does not give the agent the authority to override the principal's decision-making until the person with dementia no longer has legal capacity.
A Power of Attorney gives someone else the legal power to make decisions on behalf of someone who is no longer able. If you are concerned about a relative reaching this point, then first of all they need to be diagnosed with Dementia by a Doctor.
Typically, as long as dementia is minor or nonexistent, a person in the beginning stages of a dementia-causing disorder will be deemed mentally competent in the eyes of the law.
In general, a person with dementia can sign a power of attorney designation if they have the capacity to understand what the document is, what it does, and what they are approving. Most seniors living with early stage dementia are able to make this designation.