What Is a Power of Attorney?

power of attorney

A power of attorney is an authority to authorize or perform on behalf of another. A power of attorney can be general or specific. General powers of attorneys allow the principals to conduct certain personal acts and dealings as the agent or attorney-in-fact. Such authority may be exercisable by anyone. Others require specific performance to be lawful.


The power of attorneys is most often used in the business and financial affairs fields. General powers of attorney give the agent permission to manage or transact business as though the principal was there. The person delegating the authority to another is usually the principal, donor, or grantor. Some jurisdictions require that any person wishing to create such a trust must first appoint an attorney in fact. In this way, the person can assure the faithful performance of duties even if they are not personally present in the offices.


Some jurisdictions also limit the authority of the agents to be agents for the particular transaction at hand. In most instances, however, the powers are broad and include all transactions, negotiations, and discussions of financial affairs. This includes powers not merely to manage money but also to participate in contracts, carry out research, and set up foundations, corporations, and charities. A power of attorney that limits the agent’s powers typically does so on the basis that the person using the document lacks the mental capacity to exercise management of those powers.


Whenever you sign a power of attorney, it is normally done so by assigning someone the legal authority to act on your behalf. The individual who signs the document must understand the principal’s role will be able to designate the right person or individuals to make decisions on your behalf. It is important that the individual exercising the power of attorney has the same level of understanding as to the principal. The principal is always the individual who has the greatest level of confidence and trust in the ability to make decisions. Therefore, it is important to protect that trust by making the attorney-in-fact responsible for all decisions made in reliance on that understanding.


As an example, let’s say that you want your son or daughter to develop a business. You would want the individual you have designated to make decisions on their behalf to be trustworthy. If they are not, your interests will be violated. Therefore, a Power of Attorney must be established that establishes a relationship between the principal and the individual being appointed as a representative of the principal.


In general, terms, when you sign a Power of Attorney, you agree that your Principal will have (and should have) certain powers and duties on your behalf and these powers must be exercised on your behalf. The Power of Attorney should not be confused with a Durable Power of Attorney, which is just as it sounds. Durable powers of attorneys last only until the time your principal dies, so you would not need to change agents if you wanted to retain the services of the agent you select.