Understanding the Role of Power of Attorney

A guide to understanding how a Power of Attorney functions as a legal tool for managing affairs during periods of incapacity or absence.

1. Defining Power of Attorney. A Power of Attorney is a formal arrangement where the 'principal' grants authority to an 'agent' or 'attorney-in-fact' to act on their behalf. This authority can be broad, covering financial and legal matters, or narrow, limited to specific transactions. It is important to distinguish between a financial POA, which manages assets and accounts, and a medical POA, which pertains to healthcare decisions. Most families opt for a 'durable' Power of Attorney. This provision ensures the document remains valid even if the principal becomes incapacitated and unable to make decisions for themselves. Without the 'durable' designation, the legal authority typically expires upon the principal's incapacity.
2. The Responsibilities of the Agent. Serving as an agent is a significant responsibility that carries a fiduciary duty. This means the agent is legally required to act in the best interest of the principal at all times. They must manage assets with care, maintain clear records, and avoid any conflicts of interest. Many people consider choosing a family member, a trusted friend, or a professional fiduciary to serve in this role. The choice often depends on the complexity of the estate and the specific comfort level of the parties involved. Because this role involves access to sensitive financial or medical information, clear communication between the principal and the agent is essential before the document is signed.