The shake-up will modernise the process and make it easier to access, the Government said.
LPAs are legal documents that allow people to appoint one or more others, known as attorneys, to help them make decisions about their welfare, money, or property on their behalf in future if this is needed.
Someone must be aged 18 or over and have the ability to make their own decisions when they make their LPA.
The proposals to enable people to make LPAs completely online will bring them into line with other government services such as applying for a divorce.
The current paper-based system will continue to operate, so people can use it if they want to.
The service is operated by the Office of the Public Guardian and currently handles more than 19 million pieces of paper annually.
The Government has also committed to looking further into how the new digital system could improve the witnessing process and make it simpler.
The reforms will bolster safeguards to protect vulnerable people from abuse or fraud, the Government said.
The plans include new identification checks which would require official documents or information such as a driving licence, passport or government gateway account as part of a strengthened verification process, it added.
The number of registered LPAs has increased drastically in recent years to more than six million, but the process of making one retains many paper-based features that are more than 30 years old.
The announcement follows a Government consultation which sought views on modernising the system.
The proposals have been developed following engagement with Age UK, the Law Society and the National Mental Capacity Forum.
Justice Minister Tom Pursglove said: “A lasting power of attorney provides comfort and reassurance to millions of people that decisions will be made in their best interests should they lose capacity.
“Our reforms will make the system easier to access, simpler and even more secure from fraud. This forms part of our plans to harness technology across government and provide better services to the public.”
Stuart Howard, Interim Public Guardian for England and Wales, said: “Lasting powers of attorney are vital in helping people plan for the future and stay in control of their decisions.
“These reforms will enable us to modernise the process – ensuring our service is fit for the future, safe and simple to use, and can be accessed online.”
Shaun Moore, financial planning expert at wealth managers Quilter said a revamp of the power of attorney system is “long overdue”.
He continued: “An LPA can only be created while you have mental capacity – once you’ve lost capacity it is too late.
“While the conversation with family members can be hard and the process time-consuming, it must be put to the top of the to-do list or risk losing this vital avenue of protection.
“For those considering registering an LPA, it is vital to do so sooner rather than later to ensure it is in place should the worst happen.”