Power of Attorney
A legal document authorizing a designated person to make financial or medical decisions on another's behalf.
What is Power of Attorney?
A power of attorney (POA) is a legal document granting one person (the agent or attorney-in-fact) authority to act on behalf of another person (the principal) in financial, legal, or medical matters. A durable power of attorney remains effective if the principal becomes incapacitated, making it a critical component of incapacity planning. A financial POA allows an agent to manage bank accounts, pay bills, file taxes, and manage investments. A healthcare POA (or healthcare proxy) allows the agent to make medical decisions. Without a POA, family members may need to go through costly guardianship or conservatorship proceedings to manage an incapacitated person's affairs.
Example
An elderly woman grants her adult daughter a durable financial power of attorney. When the woman develops dementia, her daughter can continue paying bills, managing investments, and filing tax returns without going to court. Without this document, the daughter would have had to petition for conservatorship — a court process that can cost $5,000–$10,000 or more and involves ongoing court supervision of financial decisions.
Source: Investopedia — Power of Attorney