In this article, we will talk about the Power of Attorney in detail like what is the power of attorney, its types, and cases under which we need the Power of Attorney. We will discuss all these topics with examples. So let’s start the topic with its definition.
What is the Power of Attorney?
It is a legal document that is used to pass the legal authority from one person to another person to take the financial or personal decision. The agent has the full authority to complete the given task. The agent will be considered as the principal is giving its assent to do the work. For example, if a person X gives the General Power of Attorney to Y to do all his work. The work done by Y will be recognized as done by X.
Principal and agent
There are two parties in case of Power of Attorney:
The person giving the POA to another person is called the principal. He can also be known as executant or grantor.
The POA assigned by the principal on behalf of the person is called an agent. He can also be known as Attorney or grantee. Anything done in the color of his duty will be considered as done by the principal. But any act done by the agent without doing his duty will not be considered as done by the principal.
Now, I can consider that you have the idea that what is Power of Attorney. Now, the question comes in mind that why we need the POA. So let’s discuss the needs of the POA.
Why the Power of Attorney (POA) is required?
There are various types of reasons in which we need the power of attorney, such as:
Physical handicap- if a person has a health issue then he can appoint the agent to do the work on his behalf. Let’s take the example of husband and wife. The wife is pregnant and wanted to execute a document but cannot go in such a condition; in this situation, she can appoint her husband as an agent to execute that document.
Travel restriction- the person who is restricted to travel can also appoint the person to act on his behalf by giving him the POA. For example, Ram is in the country of the USA but he wanted to make a deal within India, but cannot come to India due to some reason. In that case, he appoints the Rahul to make a deal in India on his behalf by giving him POA.
Busy- generally, the businessman is busier in their daily works, so he cannot go everywhere to deal with his clients or other parties. In that case, he can give the POA to his employee to execute some work on his behalf by giving him special powers.
Elderly- If the person is aged and cannot take his decision can appoint the agent by giving POA to the person to take the decision on his behalf.
Generally, POA is given in the cases of money management or the property or estate management or personal care like in case of emergency. The person can also apply the restrictions on the powers given to the agent in POA. That’s why there are two types of POA that can be used by the principal to appoint the agent.
Types of Power of Attorney
The POA has three types:
General Power of Attorney (GPA)
The GPA assigned by the principal gives unlimited powers to the agent. The agent becomes the virtual owner. For example, if the principal gives the GPA to the agent of a property, it means the agent has the full powers to sell that property, take the loan or mortgage the property and do all other things which can be done with that property. GPA gives the broader powers so it should always be given to the trustworthy person.
Special Power of Attorney (SPA)
It is for the limited purpose to perform the specific task by an agent. For example, A appoints the B as his agent by SPA to collect the rent of a house. in this case, the B has no right in the house where he is appointed to collect the rent.
Durable Power of Attorney
If the person thinks that he may lose his health after some time, in that case, he can assign the durable POA where it will not consider as invalid even after the principal got mentally incapacitated.
The elements of Power of Attorney
Detail of executor– there should be the full details of a person who is executing the POA
Agent– there should be the full details about the agent of POA
Types of POA– the type of attorney must be given under the document of the POA.
Purpose- If the attorney is SPA then the purpose should be written in clear words.
Dates- there must be the date of execution and if the attorney is for a specific period of time, the expiry date should be mentioned.
Detail of property- there should be the full details of the property if the agent is appointed to maintain or do something with the property.
Notarized– the document of POA should be notarized by the advocate who can declare that the principal is able to make the contract of the POA.
Language of the Power of Attorney
It must be written in the language which is known to the principal or the person who is making the POA. If the person is illiterate, the scribe and the identifier must explain all the points given under the instrument to that person in a suitable language that can be under stable to the person. After this, the administrator will take the oath from the principal that all the facts and points written in the documents are known to him and he knows the person on whom the POA is granting.
Power of attorney by two or more person
The POA can be executed by the two or more persons there is no limit on this. Also, a single person can execute the POA on the name of more than one person by adding a clause in the instrument.
There is only one between GPA and SPA is that SPA is granted only for specific purposes whereas in the GPA the agent has broader powers given by executor.
The legal status of Power of Attorney
So now we will discuss the legal status of the POA.
Who can create?
The person who is sound mind and capable to give his consent can create the POA.
The person who is mentally incapacitated cannot create the POA and if there is any POA is granted by that person, it shall be considered as invalid in the court of law. In a case, if a person gives the attorney when he is sound mind but after that; he becomes incapacitated, in this matter, the attorney will be considered as invalid.
Termination of Power of Attorney
- Specific task completed
- Revoked by either of the party in writing
- Validity period is over
- If the Principal get incapacitate, bankrupt or dies
- If the husband and wife have assigned the POA between each other, the POA will be terminated on the occasion of Divorce or legal separation.
The drawback of Power of Attorney
The only drawback of POA is Misuse by agents. It can be possible in case of a GPA that the agent has the power to make a decision. There are chances that he takes the wrong decision which you never wanted to do. For example, an agent sells the property of the principal in 10 lakhs because he had the GPA of principal. But the principal was not wanted to sell that property in 10 lakhs. But now, the property has been sold, so the principal has to take the loss on that property.
- Appoint an honest and trustworthy person
- Careful while drafting the GPA