What is the main purpose of a power of attorney?

The main purpose of a power of attorney is to allow someone to manage finances on behalf of another individual. This legal document grants authority to an appointed person, referred to as the agent or attorney-in-fact, to make decisions and handle financial matters for the principal (the person who grants the power). This can include tasks such as managing bank accounts, paying bills, filing taxes, and making investment decisions, especially when the principal is unable to do so themselves due to illness, absence, or incapacitation.

While estate planning and tax implications are important in financial planning, they are not the primary focus of a power of attorney. Similarly, specifying medical decisions falls under a different document, typically known as a healthcare proxy or advance directive, rather than a power of attorney. Allocating savings to an investment account involves investment decisions, but a power of attorney specifically pertains to the authority to act on someone’s behalf without directly allocating funds into any particular account. Thus, the essence of a power of attorney is centered around financial management and decision-making authority.