'Power of Attorney' is explained in detail and with examples in the Real Estate edition of the Herold Financial Dictionary, which you can get from Amazon in Ebook or Paperback edition.
A power of attorney is an agreement in writing that grants another individual the authority to make some choices if the grantor is not available. This person who receives the power does not have to be an attorney. Attorneys are typically only involved in drafting up or potentially witnessing such an agreement. The phrase comes from an individual receiving status as an agent or attorney in fact.
When people implement such a power of attorney they do not lose the ability to make their own decisions. Instead they are allowing another individual to act for them in matters specified within the written text. This can be very helpful if people are out of the country or in the hospital as an example. Someone else with this authority would be able to cash checks at the bank or pay bills on their behalf. It is simply a matter of sharing power with another person. The agent is only carrying out the grantor’s wishes, not actually making choices for them, so long as they are coherent and mentally capable.
People who will be out of town for an extended period of time might find these arrangements particularly useful. With a power of attorney, the agent could carry out major decisions such as selling cars or other personal assets. The Internet has eliminated the need for some of these functions as computers and mobile devices make it possible for people to buy and sell stocks and handle many financial transactions from anywhere they have an online connection. There are still cases where a transaction will require an in person agent to handle them.
There is also a special kind of power of attorney that is used by individuals who lose their ability to handle decisions for their personal financial affairs. This is known as a durable power of attorney. In this case, the word durable refers to the ability of the agent to make the choices on the grantor’s behalf when he or she can not mentally do them. This type of arrangement grants the agent the legal authority and responsibility to make the best possible physical and financial decisions for the grantor.
It means that the agent is able to spend the individual’s money as appropriate, cash checks, deposit checks, and even withdraw money from the personal bank accounts. The agent further gains the authority to sign contracts, sell personal property, take legal actions, and file and follow up on insurance claims.
When people decide to enter a durable power of attorney arrangement, a notary public or lawyer should witness the document before they sign and execute it. If such individuals need to have a durable agreement established and are not mentally able to do it, courts can do this for them as they deem necessary.
Agents who become appointed to this position are expected to keep correct and segregated records on each transaction they perform. The records must also be easily available at all times. When the individual dies, his or her power of attorney becomes null and void. The will is responsible for the dispensation of the deceased person’s estate.
Powers of attorney can be rescinded. If individuals feel unhappy in the ways that their agent is managing their personal affairs, they can simply revoke the authority back at any point. It is always wise for people to choose an individual to be agent whom they know and implicitly trust.