A power of attorney is a formal document that authorizes your “agent” to legally act on your behalf.
The power granted may be very specific (“sell my car”) or very broad (“manage my finances”). A power of attorney may not authorize an agent to make health care decisions; that requires a Health Care Proxy. One key point: the POA is generally meant to work when you are not physically able to take the actions assigned to your agent. Also, a POA becomes ineffective upon your death.
In addition to the breadth of powers you may assign, you are also able to determine when the power of attorney takes effect and terminates. For instance, you could specify that a limited power of attorney is only good until a certain date (e.g., the closing date of the sale of real property). It is also possible to ensure a power of attorney remains in effect even if you become mentally incompetent to act on your own. This durable power of attorney may give your agent great power over your finances, so you should be very careful to choose an agent you trust. Also, these durable powers of attorney differ from a standard POA because you are not able to revoke the POA as long as you remain incompetent to decide on your own.
It is also possible to create a POA that does not take effect until some future event. This is called a “Springing” POA because it springs into effect upon the future date or event. Typically, they are used as a precaution in the event you become incapacitated (e.g., in a coma) and allows your agent to continue to pay your bills and take care of your expenses.