In legalese, a power of attorney is simply a document that authorizes another person to act on your behalf. The term is also perfectly descriptive — especially the word "power."
"It's a very powerful document, and people have to be aware of what the document does," said Kimberly Schechter, an attorney specializing in trusts and estates at Novick and Associates in New York. She told CNBC's "American Greed" that in its broadest form, a power of attorney can give your designee "unfettered access to financial information, to making business decisions, opening bank accounts, closing bank accounts."
And yet, Schechter believes that everyone should consider having just such a document drawn up — and not only senior citizens.
"It's my professional opinion that as soon as someone turns 18 years old they should consider doing (it)," she said. "The dangers of not assigning the power of attorney or giving someone the authority to do so can be extremely, extremely costly."
That is because, when used properly, a power of attorney can protect your assets should you become incapacitated. Or it can free you to concentrate on other matters, such as running a business, while someone you trust — known as your "agent" or "attorney-in-fact" — handles your day-to-day financial affairs. Experts say a power of attorney is an essential part of any financial plan, and not just for the very rich.
But, as the sayings go, with great power comes great responsibility. Also, absolute power corrupts absolutely.
Some wealthy professional athletes including NBA Hall of Famer Dennis Rodman and former NFL and college football great Ricky Williams learned that the hard way when they entrusted their finances to Peggy Fulford, aka Peggy King.