The power of attorney (POA) is the legal authority given to a person designated to perform tasks for the principal or the individual benefitting from this arrangement. The person acting on the power of attorney can make important decisions regarding the principal’s medical care, finances, assets, property, and investments. This is done through a legal document that outlines who the power of attorney is and the principal. The paperwork also defines the scope of the legal authority and to what extent the decisions can be made.
A POA is useful for a principal who cannot sign legal documents, can’t be present for financial transactions, or is simply incapacitated. It remains in effect if the principal becomes disabled or seriously ill, and in other times of emergency, that prevents the principal from making decisions. The POA is then given full responsibility and power to sign the legal documents on their behalf according to the principal's originally outlined.
The POA can be either limited or general, allowing the agent representing the principal to have limited or broad authorization. The general can act on behalf of the principle in any matter, as long as it is legal within the principal’s state. They can sell property, file taxes, handle assets, move funds, sign checks, etc. However, for a limited POA, the agent can only act based on specific items detailed in the agreement.
The principal may cancel the power of attorney for different reasons. For example, they may revoke the agreement when they no longer require it. In other circumstances, the court may invalidate it for a reasonable cause. For example, if the principal was under duress when they designated the POA and family members discovered this, the court may rule that the POA has no legal authorization. If the POA authorization was created during the marriage, if the principal and the agent divorce, this can also invalidate the agreement. Also, if the principal dies, this will revoke the agreement.
There are different types of powers of attorney; for example, a springing power of attorney only occurs when the principal is incapacitated. The durable power of attorney comes into effect immediately after the document is signed. A POA document typically allows the agent to make financial and legal decisions on behalf of the principal only if the principal’s mental state is sound.
When the principal cannot make decisions for themself due to mental deterioration, the agreement dissolves. An example of this occurring is if a principal created a POA when they were 50, making their best friend the agent representing him while traveling out of the country. However, this agreement would terminate if the principal is nearing 87 and begins suffering from dementia. In this case, his wife and kids will be making decisions for him and signing the paperwork on his behalf, and his friend is no longer the POA.