A power of attorney is an agreement between two parties: a principal and an attorney in fact. The attorney in fact need not be an attorney at law (a lawyer). A power of attorney gives the attorney in fact rights to act in the principal's place. Attorneys in fact are fiduciaries of their principals.
Powers of attorney may be general, limited, or special. They are usually written documents, although some jurisdictions allow oral power or attorney agreements. Many jurisdictions impose special requirements on their form or substance.
General powers of attorney allow agents to take any legal action their principals may take. For example, the agent could open or close bank accounts in the principal's name, invoke or waive the principal's contractual rights, or buy or sell stocks for the principal. In most jurisdictions, even a general power of attorney is not unlimited due to statute or court precedent. For example, a jurisdiction might prohibit attorneys in fact from using their principals' assets to pay themselves.
A principal may grant a limited power of attorney by placing restrictions in the power of attorney.
Some jurisdictions allow special powers of attorney for certan situations. Most often, special powers of attorney are used to appoint people to make medical decisions on the principal's behalf when the principal is incapacitated.
Normally, a power of attorney only remains effective as long as the principal is alive and competant to make decisions. Principals may, however, grant durable powers of attorney that persist after they are no longer able to make their own decisions.