Future Business Leaders of America (FBLA) Agribusiness Practice Test

What is a power of attorney used for in estate planning?

1. Sign legal documents on behalf of another

2. Create investment strategies

3. Transfer property rights immediately

4. Settle debts after death

The correct answer is: Sign legal documents on behalf of another

A power of attorney is utilized in estate planning primarily to grant authority to an individual to act on behalf of another person in legal matters. This can be particularly important when an individual becomes unable to manage their affairs due to health issues or other circumstances. The designated person, often referred to as the agent or attorney-in-fact, is empowered to sign legal documents, make decisions regarding financial matters, and handle various aspects of the principal's property and affairs. This instrument ensures that there is someone trusted to manage the person's interests according to their wishes, particularly in the event of incapacity. The other options relate to different aspects of financial and estate management but do not align specifically with the purpose of a power of attorney. Creating investment strategies, for example, refers more to financial planning rather than the delegation of authority for legal documentation. Transferring property rights immediately involves different legal instruments, such as deeds, rather than a power of attorney. Lastly, settling debts after death typically falls under the responsibilities of an executor or administrator of an estate, not the authority granted by a power of attorney, which ceases to exist upon the death of the principal.