It is a written legal document that, in its simplest form, establishes a fiduciary relationship between two individuals. Essentially, it gives someone the authority to act on your behalf. The person that appoints a Power of Attorney is commonly referred to as the "principal" and the person that they appoint is referred to as the "agent," or the "attorney in fact." Once a Power of Attorney is signed, the agent has the authority to make decisions for the principal. The Power of Attorney has to be created by a principal who has the mental capacity to understand what he or she is signing. This understanding must be demonstrated at the time that the document is signed. The authority granted under a Power of Attorney can either be broad or very limited in nature. For instance, a broad Power of Attorney might give the agent control or responsibility over the principal's entire net worth. On the other hand, a limited Power of Attorney only allows the agent to conduct specific business affairs for the principal. There are three types of Power of Attorney. These include durable, non-durable, and springing Powers of Attorney. A durable Power of Attorney gives the agent the right to continue managing the principal's affairs, even after the principal loses their mental capacity or becomes disabled. A non-durable Power of Attorney is typically used for a specific reason, such as the temporary management of financial affairs while the principal is physically unavailable. A springing Power of Attorney allows the principal to plan for the future in preparation for the onset of a specific event that may "spring up," such as illness or disability. Written by Amy Snyder.