A power of attorney is a legal relationship in which one person (the principal) grants another party (the agent) the authority to perform legal acts on behalf of the principal. Although third parties are not obligated to honor a power of attorney, they are protected from legal liability if they do honor it. Powers of attorney are regulated under state law.
A power of attorney is created when the authorization form is drafted and signed in accordance with state law. The form must include the names and addresses of the principal and the agent, a description of the powers granted, some indication of its duration, and the signature of the principal. Some states also require the agent to sign the form. All signatures must be either notarized or witnessed, and the notary or witnesses must sign the form. The agent must use the original power of attorney form; a photocopy is not valid.
A power of attorney may be classified as general or limited. A general power of attorney authorizes the agent to perform any legal act that the principal could perform himself. A limited power of attorney authorizes the agent to perform only specified legal acts. A power of attorney may also be classified as durable or nondurable. A durable power of attorney remains valid even if the principal becomes incapacitated (mentally incompetent, unconscious or unable to communicate), while a nondurable power of attorney automatically expires when the principal becomes incapacitated. A power of attorney may also be classified according to the nature of the authority granted: a medical power of attorney, for example, or a financial power of attorney.
A financial power of attorney might authorize an agent to withdraw money from the principal's bank account, pay bills, sign a contract, settle an insurance claim, purchase real estate or file a tax return. A medical power of attorney might authorize the agent to consent to medical treatment, select a treatment from available options, issue a Do Not Resuscitate Order or refuse treatment on religious grounds.
All states allow the principal to revoke a power of attorney at any time, as long as he is mentally competent and able to communicate. The agent might still act on behalf of the principal even after the revocation, however, if he presents the power of attorney form to a third party who has no reason to know of the revocation. The agent might, for example, withdraw money from the principal's bank account on the strength of a revoked power of attorney. In this case the bank would not be obligated to return the money, but the principal would be entitled to sue the agent.