Financial Word of the Day: Power of Attorney

Larry Jones
Jun 25
2 min read

Updated: Sep 26

Ever wondered who would make financial decisions for you if you were suddenly unable to? That’s where today’s term comes in.

Definition of Power of Attorney (POA)

A Power of Attorney is a legal document that gives someone you trust the authority to act on your behalf in financial, legal, or medical matters—either temporarily or permanently. This trusted person is called your “agent” or “attorney-in-fact” (And no, they don’t have to be a lawyer).

There are several types of POAs, but the most common are:

General Power of Attorney – Grants broad powers to handle financial and legal matters.
Durable Power of Attorney – Remains in effect even if you become mentally incapacitated.
Limited (or Special) Power of Attorney – Authorizes someone to act only in specific situations (like selling a house).
Medical Power of Attorney – Allows someone to make healthcare decisions for you.

Why It Matters

Imagine you're in an accident or facing a serious illness and can’t speak or make decisions. A Power of Attorney ensures that someone you choose steps in—not the court, not a distant relative, and definitely not chaos.

Without a POA, your loved ones might have to go through a time-consuming (and expensive) legal process to gain the authority to manage your affairs.

Real-Life Example

Let’s say Linda is 68 and recently gave her daughter, Kim, Durable Power of Attorney. A few years later, Linda has a stroke. Because of the POA, Kim can immediately begin paying bills, handling insurance, and working with financial institutions on her mom’s behalf—no court hearings required.

On the flip side, imagine if Linda hadn't set this up. Kim would be stuck in legal limbo during a crisis—when time and clarity matter most.

How You Might Use It in Conversation

“We’re getting our estate plan in order, and the attorney recommended we set up a Power of Attorney so our kids can step in if something happens to us.”

Or…

“My dad gave me Power of Attorney last year. I’ve been helping him handle some of his finances now that he’s slowing down.”

Money Tip

Setting up a POA isn't just for retirees. If you're an adult with assets, responsibilities, or dependents, this is a smart move. Life happens—and it’s better to plan when you're calm than scramble during a crisis.

A basic POA can often be set up affordably through an estate attorney or even using reputable online legal services. Just make sure it’s legally valid in your state and properly signed and notarized.

Bottom Line: A Power of Attorney is a practical, proactive way to protect your finances and future. It's like appointing a financial co-pilot—just in case you hit turbulence.

Want to build wealth wisely? Don’t just grow your money—protect it.