An authorized person is someone legally designated to act on another individual’s or organization’s behalf, whether that means signing contracts, moving money, filing taxes, or making healthcare decisions. The authority flows from a document or agreement between the person granting power (the principal) and the person receiving it (the agent). It can be as narrow as access to a single bank account or as broad as running an entire estate. More than 30 states follow the Uniform Power of Attorney Act, which standardizes much of this, though the core concepts apply everywhere.
The Main Types
The label covers several distinct roles, and the differences matter because liability and scope change with each one.
- Agent under a power of attorney. The most formal arrangement. The principal signs a legal document granting the agent specific or broad powers to handle financial, legal, or healthcare matters. The agent owes fiduciary duties and can bind the principal to contracts.
- Authorized signer on a bank account. Someone the account holder designates to write checks, make withdrawals, and conduct transactions. Unlike a joint account holder, an authorized signer typically has no ownership interest in the funds.
- Authorized user on a credit card. Someone added to an account who can make purchases but bears no legal responsibility for the balance. The primary cardholder remains fully liable for every charge, including those the authorized user runs up.
- Corporate authorized person. An employee, officer, or other individual authorized to act for a business entity. The designation usually comes through a board resolution or corporate bylaws rather than a personal power of attorney.
- Tax representative. A person authorized to interact with the IRS on a taxpayer’s behalf, typically through Form 2848 (Power of Attorney and Declaration of Representative).1Internal Revenue Service. About Form 2848, Power of Attorney and Declaration of Representative
An authorized user on a credit card carries essentially zero financial risk. An agent under a power of attorney can be sued for mismanaging the principal’s affairs. Knowing which category applies to you matters more than most people realize.
Who Qualifies
Mental capacity is the baseline requirement in nearly every context. The person accepting authority must understand what they are agreeing to do and the consequences of their actions. Courts presume adults are competent unless a judge has ruled otherwise or a guardian has been appointed.
For most financial and legal transactions, the authorized person must be at least 18. Contracts signed by minors are generally voidable, which makes minors unreliable agents for binding agreements. Credit card authorized users are a notable exception: many issuers allow minors on an account because the primary cardholder, not the authorized user, carries repayment responsibility.
Business accounts typically require the authorized person to be a company officer, director, or employee whose appointment is documented through a corporate resolution. Family members often serve as agents for personal matters like healthcare directives and financial management, as long as no court-ordered restriction blocks the appointment.
How Much Power the Role Carries
The most consequential decision when appointing an authorized person is how much authority to grant. Too narrow and the agent cannot accomplish what you need. Too broad and you have handed someone the keys to your financial life.
General Authority
A general power of attorney grants the agent broad discretion across many categories: banking, real estate, investments, business operations, and more. It fits situations where the principal needs comprehensive coverage, such as an extended absence or a gradual decline in health. Even general authority has limits under the Uniform Power of Attorney Act. The agent cannot create or change beneficiary designations, alter survivorship rights, make gifts, or modify a living trust unless the principal explicitly grants those specific powers in the document.
Limited Authority
A limited (or special) power of attorney restricts the agent to a specific task or set of tasks. Common examples include signing closing documents on a real estate transaction, managing a particular investment account, or handling tax filings for designated years. Once the task is complete or the stated time period expires, the authority ends automatically. This is the safer option for one-off situations where you need a stand-in but do not want lingering access to your accounts.
Durable vs. Non-Durable
Whether the authority survives the principal’s incapacity depends on a single word in the document: durable.
A non-durable power of attorney terminates automatically if the principal becomes mentally incapacitated. It works for temporary situations where the principal is available and competent but cannot be present, like signing documents while traveling. The moment the principal loses the ability to make decisions, the agent’s authority vanishes.
A durable power of attorney contains language stating that the agent’s authority continues even if the principal becomes incapacitated. This is the version most people need for long-term planning, because the whole point of naming an agent is usually to have someone who can step in when you no longer can. Under the Uniform Power of Attorney Act, a power of attorney is presumed durable unless the document explicitly says otherwise. States that have not adopted the act may default the other direction, so the language in the document matters.
A third option, sometimes called a springing power of attorney, only activates when a triggering event occurs, usually the principal’s incapacity as certified by a physician. The appeal is that the agent has no power until it is actually needed. The downside is that proving the triggering event can cause delays at the exact moment quick action matters.
Fiduciary Duties and Self-Dealing Limits
An agent under a power of attorney is a fiduciary, held to the highest standard of loyalty the law recognizes. In practical terms, fiduciary duty breaks into three obligations: acting in the principal’s best interest (loyalty), following the principal’s instructions (obedience), and handling matters with reasonable skill and prudence (care). An agent who treats the principal’s money as a personal fund violates all three at once.
Self-dealing is where most abuse happens. Unless the power of attorney specifically authorizes it, an agent generally cannot make gifts to themselves from the principal’s assets, sell the principal’s property to themselves, or steer the principal’s business to companies the agent owns. Even when a document authorizes gifting, most practitioners cap it at the principal’s established giving pattern or the federal annual gift tax exclusion per recipient. Larger or unusual gifts from the principal’s assets to the agent often warrant court approval.
Violations carry real consequences. A principal, their family, or a court-appointed guardian can sue the agent for breach of fiduciary duty to recover misused funds. In serious cases involving theft or embezzlement, criminal prosecution is on the table. Courts have little patience for agents who exploit the trust placed in them.
How to Designate One
The exact paperwork depends on the type of authority, but several requirements show up almost everywhere.
Identity verification comes first. Financial institutions follow Know Your Customer protocols, so both the principal and the proposed agent typically need government-issued photo identification. For business accounts, a corporate resolution or certificate of incumbency establishes who can appoint agents for the company.
For tax matters, the IRS uses Form 2848 to authorize a representative. The form requires listing specific tax matters and years covered, and the representative must be someone eligible to practice before the IRS, such as an attorney, CPA, or enrolled agent. For other purposes, like authorizing a lender to verify income, Form 8821 (Tax Information Authorization) is the appropriate document.2Internal Revenue Service. Power of Attorney and Other Authorizations
Most power of attorney documents require notarization. Many banks offer free notary services to existing customers; independent notaries charge fees that vary by state. Some states require witnesses in addition to notarization, particularly for healthcare directives. When real estate is involved, the document often needs to be recorded with the county clerk’s office.
Electronic Signatures
Federal law under the ESIGN Act generally gives electronic signatures the same legal weight as ink signatures. Powers of attorney, however, are frequently among the categories excluded from electronic signature laws, alongside wills and trusts. Whether an electronically signed power of attorney is valid depends on your state’s rules. When in doubt, a wet signature with notarization is the safer choice.
Backup Agents
A well-drafted power of attorney names at least one successor who steps in if the primary agent dies, becomes incapacitated, or resigns. That avoids the expense and delay of going to court to appoint a replacement at a moment when the principal may not be able to do it. Co-agents, where two people share authority at the same time, are another option but tend to create friction. Disagreements can slow time-sensitive decisions, and in healthcare situations, conflicting instructions can push the call back to the provider.
When the Principal Is on the Hook
Granting someone authority to act for you means you are generally liable for what they do within that authority. This is the trade-off people underweight.
If an agent signs a contract within the scope of the granted authority, the principal is bound just as if they had signed personally. This applies whether the authority was granted explicitly in writing or implied by the nature of the relationship and business customs. An agent running a principal’s retail store has implied authority to order inventory even if the power of attorney does not spell out “ordering inventory” as a permitted act.
The more dangerous scenario is apparent authority. If a principal’s conduct leads a third party to reasonably believe the agent has certain powers, the principal can be bound even if those powers were never actually granted. This matters most after revocation: if you cancel an agent’s authority but do not notify the people and institutions the agent dealt with, those third parties may continue relying on the old authorization. Transactions the former agent conducts with uninformed parties can still land back on the principal.
Agents do not have implied authority to take extraordinary actions, like selling part of the principal’s business, starting a new business, incurring significant debt outside normal operations, or relocating business premises. A principal who has not specifically authorized those acts generally will not be bound. That said, a principal who learns about an unauthorized act and does not object may be deemed to have ratified it.
Ending the Authority
A principal can revoke authority at any time, provided they still have the mental capacity to do so. The process takes more than telling the agent to stop.
Effective revocation starts with a written statement signed by the principal that identifies the agent whose authority is being revoked and the date the revocation takes effect. For IRS tax representation, the principal files this revocation statement with every IRS office where the original power of attorney was submitted, listing the name and address of each representative being removed.3eCFR. 26 CFR 601.505 – Revocation, Change in Representation and Substitution or Delegation of Representative
The step most people skip is notifying third parties. Every bank, brokerage, government agency, and business that dealt with the agent needs the revocation notice. Until they know, they have no reason to refuse the agent’s requests, and the principal may remain liable under apparent authority principles. Demand the return of any documents, cards, keys, or credentials the agent holds.
Authority also terminates automatically in certain situations. The principal’s death ends the agent’s power, though some states allow limited authority to complete transactions already in progress. A non-durable power of attorney terminates when the principal becomes incapacitated. Divorce or annulment typically revokes a spouse’s authority under a power of attorney in states following the Uniform Power of Attorney Act, though this varies by jurisdiction.