The following are the essential considerations that you need to think about when creating a financial power-of-attorney document: 1. The need for a POA Do you think you need help with handling your financial affairs? There are certain situations in which powers of attorney are not needed. For instance, if you own a big estate, you may be better off preparing a revocable living trust that offers great tax benefits and fits your needs. Power of attorney is a document that gives people the authority to act on another person s behalf for a specific period and matter depending on what is stated on the paper. This means that another person can sign documents for you and make decisions on your behalf. The person who gives the power of attorney is often called the principal while the grantee is called the proxy or sometimes the agent. Just like the previous legal document type, it also ends at the death, mental illness, or disability of the principal. 3. Durable - It grants the agent the right to act on the principal s behalf even after he or she has become mentally incapacitated. Thus, the agent can make crucial decisions for you when you are unable to do so. The durable power of attorney could cover different decisions and responsibilities, aside from health care decisions, like: Providing gifts which can play a major part in estate tax planning. Accessing safe-deposit boxes. Signing tax returns, IRS documents, and settling tax disputes. Pursuing legal matters or litigation on behalf of the principal. Although power of attorneys are often given for a specific period of time, some principals, or those who are giving the power of attorney, can extend the contract until something happens to them like when they become terminally ill or when they become gravely injured. This however should be plainly stated on the contract for the power of attorney. To put it simply, this legal term is a medium for granting an individual the right to make medical, financial, and other decisions on your behalf. Easy to understand, isn t it? The authority to manage another person s affairs may begin immediately or only when the principal can no longer make decisions on his or her own.