What Is a Power of Attorney?
A power of attorney is simply a document giving another person (the agent) the legal authority to represent you and act on your behalf. This is necessary when a third person is asked to rely on that authority. In financial matters, this third party could be a bank, utility company, securities and investment broker, insurance company, mortgage lender, a company that provides materials or services to a business you own, or, numerous other individuals, business entities or government agencies with whom you conduct personal or professional business. In the case of health care matters, this third party could be various types of health care providers, such as doctors, hospitals, physical therapists, dentists and home health agencies.
Of course, a power of attorney is not necessary every time someone does something for you. For example, if you ask a friend to get a gallon of milk for you from the supermarket, your friend can do it without a power of attorney. He or she will be paying for it at the time of purchase, and the grocer has no concern about your arrangement.
It is an entirely different matter, however, if you ask your friend to go to your bank and borrow $5,000 in your name. The bank will want to be sure that you are legally obligated to repay the loan, and it will not just take your friend's word for it. The bank will want to protect itself so it will require some kind of proof that you have authorized your friend to obligate you to repay the money. A power of attorney could provide the bank with the assurance it needs.