What is a power of attorney?

A power of attorney is a legal document that grants one individual the authority to act on behalf of another in specific matters, often related to financial, legal, or healthcare decisions. This arrangement allows the person appointed, known as the attorney-in-fact or agent, to make decisions and take actions as though they were the person who granted the power, known as the principal.

The significance of a power of attorney lies in its ability to appoint someone to manage important matters when the principal is unable to do so, whether due to illness, absence, or other reasons. It can be tailored to give broad powers or limited powers, depending on the needs of the principal. This flexibility makes it a crucial tool for ensuring that someone can handle a person’s affairs in a way that aligns with their wishes.

The other options do not accurately define a power of attorney. A form of contract for business transactions simply does not encompass the nature or function of a power of attorney. Similarly, it is not related to insurance policies or agreements between lawyers but rather serves a distinct legal function related to the delegation of authority.