A power of attorney is a legal document that binds the agent or attorney-in-fact and the principal. It’s used in the event of a principal’s temporary or permanent illness or disability or when they can’t sign necessary documents.1 Both parties must sign the document and a third party is usually required to witness it.

Most POA documents authorize the agent to represent the principal in all property and financial matters as long as the principal’s mental state of mind is good. The agreement automatically ends if the principal becomes incapable of making decisions for themself.2

For most people, the best option is to have a general durable power of attorney because it gives your agent broad powers that will remain in effect if you lose the ability to handle your own finances. An attorney can customize a general POA to limit powers even more—or add powers, Berkley says.

A person, known as the grantor or donor in different jurisdictions, can only create a power of attorney if they have the requisite mental capacity. In some powers of attorney