Related Terms
DEFINITION
Power of Attorney (POA)
Power of Attorney (POA) is a legal document that grants one person the authority to act on behalf of another person. In the context of finance, this authorisation can relate to managing bank accounts, withdrawing funds, making deposits, etc.
The extent of the person’s authority depends on the type of POA in question, as it can be limited (LPOA), which offers specific authorization, and general, which offers general authorization. The POA can also be durable (DPOA), meaning it remains in effect even if the owner becomes incapacitated, or non-durable, meaning it ends upon a specific date or when the owner becomes incapacitated.
The person who is given authority via the POA is called the agent or attorney-in-fact and the original owner is called the principal.
Synonyms
Legal authority, financial proxy
Acronyms
POA, DPOA, LPOA
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Synonyms
Legal authority, financial proxy
Acronyms
POA, DPOA, LPOA
Examples
An elderly woman grants her son Power of Attorney so that he can perform transactions on her behalf. For example, paying bills through her account. Due to her age, she also makes the Power of Attorney durable, meaning that her son retains access to her account even if she were to become mentally or physically incapacitated.
FAQ
What is the difference between a durable and non-durable Power of Attorney?
A durable Power of Attorney (DPOA) remains in effect even if the principal were to become physically or mentally incapacitated. Furthermore, a DPOA is set to last indefinitely or until revoked. It might therefore be used for older individuals to ensure their children have access to their account.
A non-durable POA on the other hand concludes at a predefined date or when the principle becomes incapacitated. It might therefore be used between business partners.
Can a Power of Attorney be used to close a bank account?
Generally, if the Power of Attorney has been given the authority to close the principal's bank account, they can do so. However, some banks may require additional verification and documentation to do so.
How does a Power of Attorney get revoked or canceled?
The principal can revoke a Power of Attorney at any time as long as they are mentally competent. Both the agent and the bank associated with the account just need to be notified of the revocation. Alternatively, if the POA is non-durable, it will also end after a predefined period of time with no interference.
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