By signing a power of attorney, a principal gives his agent the ability to carry out decisions for him or make decisions when he cannot. A power of attorney can limit an agent to handling certain issues, such as financial matters, or offer broad legal authority.Continue Reading
A power of attorney gives an agent the legal right to handle a principal's affairs according to his wishes. An agent, for example, can't sell a principal's house if the principal does not want to sell it. Similarly, an agent cannot access a principal's bank account without the principal adding the agent's name to his bank account and giving him the right to sign checks and withdraw money.
Some banks and brokerage firms have specific rules for recognizing and accepting powers of attorney, such as only accepting documents that are notarized. Some courts do not allow agents to make gifts on behalf of a principal unless the power of attorney specifies that the agent has gifting authority.
General powers of attorney go into effect immediately, give an agent specific rights and responsibilities and become void if the principal becomes disabled or otherwise incapacitated. Springing powers of attorney only become effective after a predetermined event, such as a severe illness or if the principal becomes disabled, and give an agent specific rights and responsibilities. Durable powers of attorney become effective immediately and remain valid even if a principal becomes incapacitated. All powers of attorney expire when the principal dies.Learn more about Financial Planning