A realistic image illustrating the concept of Power of Attorney (POA). On the left, an individual is seen signing a document titled 'Power of Attorney' with a lawyer or legal advisor explaining the details. On the right, various scenarios where POA is being exercised are depicted, including handling financial transactions at a bank, making medical decisions in a hospital, and managing real estate. The image conveys trust, legal authority, and responsibility, featuring real human faces and settings.

What is the Power of Attorney?

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 make financial or personal decisions. 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 the case of Power of Attorney:

Principal

The person giving the POA to another person is called the principal. He can also be known as executor or grantor.

Agent

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 colour 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 an idea of what is Power of Attorney. Now, the question comes to mind why do 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 why 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 wants 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 USA but he wanted to make a deal within India, but cannot come to India due to some reason. In that case, he appoints Rahul to make a deal in India on his behalf by giving him a POA.

Busy- generally, businessmen are busier in their daily work, so they cannot go everywhere to deal with their 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 make his decision can appoint the agent by giving a POA to the person to decide on his behalf.

Generally, POA is given in the cases of money management or 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 two types of POA 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 of performing a specific task by an agent. For example, A appoints B as his agent by SPA to collect the rent of a house. In this case, 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, that case, he can assign the durable POA which will not be considered invalid even after the principal becomes mentally incapacitated.

The elements of Power of Attorney

Detail of executor– there should be the full details of the 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, 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 the POA should be notarized by the advocate who can declare that the principal can 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 principle that all the facts and points written in the documents are known to him and that he knows the person to whom the POA is granted.

Power of attorney by two or more persons

The POA can be executed by two or more persons there is no limit on this. Also, a single person can execute the POA in the name of more than one person by adding a clause in the instrument.

Difference

There is only one between GPA and SPA: SPA is granted only for specific purposes whereas in the GPA the agent has broader powers given by the executor.

The legal status of Power of Attorney

So now we will discuss the legal status of the POA.

Who can create?

A person who is of sound mind and capable of giving 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 invalid in the court of law. In a case, if a person gives the attorney when he is in sound mind but after that; he becomes incapacitated, in this matter, the attorney will be considered invalid.

Termination of Power of Attorney

  • Specific task completed
  • Revoked by either of the parties in writing
  • The validity period is over
  • If the Principal get incapacitated, bankrupt or dies
  • If the husband and wife have assigned the POA to 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 the case of a GPA that the agent has the power to make a decision. There are chances that he makes the wrong decision which you never wanted to do. For example, an agent sells the property of the principal for 10 lakhs because he had the GPA of the principal. However the principal did not want to sell that property for 10 lakhs. But now, the property has been sold, so the principal has to take the loss on that property.

Precautions

  • Appoint an honest and trustworthy person
  • Careful while drafting the GPA

Conclusion

The power of attorney is important if you want to give some of your powers to your agent so that he can work on your behalf when you will not be available to do so. You must be careful while giving the POA to anybody because it is a legal power which will be transferred by you to others, so always mention the points in the draft whenever you start making the POA with others. I hope you understand the concept. Still, if you have any doubts, then you can connect with us.

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