What is a Legal Power of Attorney?

Nicole Madison
Nicole Madison

A legal power of attorney is a document that grants a person authority over another's affairs. The person who creates a power of attorney is commonly called the principal and grants a party of his choice, referred to as the agent or attorney-in-fact, the right to make decisions for him in a range of matters. For example, the agent in such a case may make investment decisions for the principal, choose medical options, and even run the principal’s business. Additionally, the agent can sell or exchange the principal’s assets if he has financial power of attorney.

Businessman with a briefcase
Businessman with a briefcase

A legal power of attorney grants the agent the power to makes decisions and act on behalf of the principal. Some powers of attorney are general and cover a wide range of matters, while others may be limited in the authority they grant. For example, a person may grant his agent the ability to make investment decisions for him and carry out transactions without seeking his approval. Sometimes a power of attorney is even granted to give a person the right to make medical decisions for another party.

An individual may choose any person he wants to be his agent. Typically, a person chooses a party in whom he has 100-percent trust for this designation. For example, a person may choose a spouse, adult son or daughter, or sibling for this duty. Sometimes people choose friends as well. When an individual creates a power of attorney for the purpose of allowing a professional to make financial decisions for him, however, he may name an investment broker or similar financial professional as his agent.

Generally, a legal power of attorney remains in effect until the creator dies or revokes it. Sometimes a legal power of attorney is created in such a way that it takes effect immediately upon its creation. Others, however, called springing powers of attorney, take effect when a particular event occurs, such as the onset of an illness or disability.

An individual who is granted authority over another person’s affairs via a legal power of attorney is required by law to act in the principal’s best interest. If the agent takes advantage of the power granted to him, the principal may terminate the power of attorney. Additionally, a judge may terminate the legal power of attorney if the agent fails to make sound decisions on the principal’s behalf.

Nicole Madison
Nicole Madison

Nicole’s thirst for knowledge inspired her to become a wiseGEEK writer, and she focuses primarily on topics such as homeschooling, parenting, health, science, and business. When not writing or spending time with her four children, Nicole enjoys reading, camping, and going to the beach.

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