A power of attorney is a legal document that gives a person the authority to act for another person in some or all money matters. Which of the following situations is the best example of a power of attorney?
Answer & explanation
Correct answer: option 2
The correct answer is Option (2) → Because of illness, Tom’s mother can no longer go to the bank to deposit money and cash her cheques. She completes some legal formalities so that Tom can do these tasks for her.
A power of attorney has two parts: a legal document, and through it one person gets the authority to handle money matters for another.
In Option (2) Tom’s mother completes legal formalities so that Tom can do her banking for her. Both parts are present.
Why the other options are incorrect
Option (1) Mary is selling her flat and hires a lawyer to check the deal. — Incorrect. The lawyer only advises Mary; she still acts for herself.
Option (3) Peter’s father is old, so Peter thinks his father cannot make decisions and that he should make them on his behalf. — Incorrect. Peter only thinks he should decide; his father has signed no legal document.
Option (4) Tom completes all the formalities so that his father can open a retirement account with the bank. — Incorrect. The father opens the account for himself; Tom gets no authority to act for him.