What is a power of attorney?

A power of attorney is a legal document that grants one person the authority to act on behalf of another individual, typically referred to as the principal. This instrument is significant because it allows the appointed person, known as the agent or attorney-in-fact, to make decisions regarding financial, legal, or medical matters when the principal is unable to do so, whether due to incapacitation, absence, or other reasons.

The power of attorney can be durable, meaning it remains in effect even if the principal becomes incapacitated, or it can be limited to certain actions or a specific timeframe. This flexibility makes it a valuable tool in estate planning and management, ensuring that the principal's desires and financial obligations continue to be managed appropriately.

Understanding the role and function of a power of attorney is crucial for fiduciary advisors, as it often intersects with their responsibilities in managing clients' affairs, ensuring that the agent acts in the best interests of the principal, and maintaining compliance with relevant laws and regulations.