What is a Power of Attorney?

A power of attorney (POA) is a legal document that allows a principal to appoint a person or an organization to act on his behalf.

A power of attorney (POA) is a legal document that allows a principal to appoint a person or an organization (also known as the agent or the attorney-in-fact) to act on his behalf. The agent can be given the power to make decisions on financial and business transactions, settling claims, operation business interests, buying life insurance, making gifts of money, or even making healthcare decisions. An attorney-in-fact literally stands in person for the principal and signs documents on the principal’s behalf as if the principal was signing.


There are three main and most used types of powers of attorney and each one stems from a different need. The most common one, General Power of Attorney, grants very broad powers to the agent for financial matters. The agent can be granted the power to open financial account and manage all personal finances. The general power of attorney is terminated when the principal becomes incapacitated (unless it says it may continue even if the person becomes mentally or physically incapacitated, see Durable POA below), passes away, or revokes the power of attorney. It is a very useful legal document to have if you plan to leave the country for certain time and want someone trusted to keep on managing your financials. The powers granted can be permanent as well as temporary. It is important to know that the powers granted are extremely broad. Therefore, it is extremely important to appoint someone very trusted as an agent.


The second most common type of power of attorney is the Special/Limited Power of Attorney. Unlike the general power of attorney, a special power of attorney grants powers to an agent only in a specific area and for a specific purpose, like managing a single bank account only, buying or registering a car, or buying a specific property (including real estate). It is useful when a principal does not personally want to handle a financial matter. He may not want to make an appearance, or be physically present to execute a financial decision, like buying/selling a property. In this case, the principal will need to have a valid power of attorney granting him the powers in that matter.


The third type is the Durable Power of Attorney. In fact, any POA can be turned into a durable power of attorney with the inclusion of durability clause. This clause keeps the power of attorney valid even after the principal becomes incapacitated. It is an essential element of estate planning, as well. It prepares one for the possibility of becoming incapacitated one day, due to illness or injury. If this possibility is the only reason for wanting one, the power of attorney may be created in a way that it will not come into effect until the principal becomes incapacitated (springing POA). A specific doctor may be named to determine the principal’s incapacity, or agreement of two licensed physicians can be stated as a condition.


Some States may have enacted their own power of attorney (Statutory POA) templates as the required style, and one needs to know about the requirements/clauses to be included. Once the power of attorney is completed and signed, you will also need to get it notarized. Since banks will not allow your agent to act on your behalf before receiving a copy of the power of attorney, it is also necessary to prepare certified copies. When you decide to revoke the power of attorney, most states will require you to collect all the copies from your agents and send them a written notice that their powers are ended. It may also be necessary to contact the relevant institutions to notify them after revoking the power of attorney.


Nobody wants to think of a time when he/she will not be able to make decisions on his own regarding important matters like business or financials. A POA is an essential tool to have ready in case that time comes unexpectedly. It enables the principal to receive help from someone trusted. It grants the agent very important powers, and power always comes with responsibility. Violating his duties may make the agent face criminal charges or held liable in a civil lawsuit. Therefore, it is always wise to consult an attorney about the powers being granted, duties of the agent, and the legal requirements. For over twenty years, we have prepared countless powers of attorney for our clients, tailored specifically according to their needs. For further information, please contact us for an appointment and we will be glad to help you.

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