What Is the Meaning of Power of Attorney?

By Joseph Nicholson
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"Power of attorney" is the legal permission to act on behalf of another person. Power of attorney can be relevant in many different contexts, and a person could designate power of attorney to a number of different professionals in their respective fields. But everyone can -- and arguably should -- designate someone as a medical power of attorney to make important medical and end-of-life decisions in the event you are rendered mentally incapacitated or unresponsive.

Definitions

The term "power of attorney" refers to both the authorization to act on behalf of another person in legal matters and the actual document that conveys such authorization. A power of attorney document creates an agency relationship between the person who executes the document, called the "principal," and the party who receives the authorization, called the "attorney in fact." It is not necessary to be an attorney at law -- that is, a licensed legal practitioner, or lawyer -- to receive power of attorney.

Powers

The ability to grant power of attorney is fairly broad and flexible. The authority granted can be very general, including decisions the principal could make for himself, or it can be very narrow and specific to certain contexts. Narrow, or limited, power of attorney is often granted to a professional, such as a Realtor, accountant, stockbroker, banker or lawyer, to facilitate her delivery of professional services to the principal. More general power of attorney is usually given only to a trusted adviser or relative.

Revocable or Durable

Most power of attorney is given on a revocable basis, meaning it can be taken away by the principal at any time. Such revocable power of attorney is, in fact, conditioned on the principal's ability to revoke it -- if the principal is rendered incapacitated, a power of attorney will not be valid unless it was specified in advance to be "durable." A durable power of attorney is purposely intended to remain in effect in the event the principal is unable to communicate. Thus, it is often used to designate a representative for health-care decisions.

Implementation

A durable power of attorney can either be immediate or springing. If it is immediate, the authority goes into effect as soon as the document is executed. This is more likely in power of attorney documents that authorize the attorney in fact to provide some service to the principal. A medical power of attorney is usually springing, meaning it takes effect only upon a certain condition -- such as the principal becoming incapacitated.

Duties

As an agent, an attorney in fact has general duties to the principal commensurate with the scope of her authority. These duties include good, reasonable conduct; the duty to account for all financial transactions associated with the agency; the duty of loyalty; and the duty of care, which means the obligation to act with professional competence and diligence (to the extent they are capable or reasonably expected to be capable). There is also a fiduciary duty to the principal, which involves the responsible handling of money and financial matters. The attorney in fact can be held to these standards in the actions he takes in his official capacity.

About the Author

Joseph Nicholson is an independent analyst whose publishing achievements include a cover feature for "Futures Magazine" and a recurring column in the monthly newsletter of a private mint. He received a Bachelor of Arts in English from the University of Florida and is currently attending law school in San Francisco.