This article has been written by Dhwaja Shrivastava, a law student, pursuing B.Com, LLB at University of Petroleum and Energy Studies and an intern at WinSavvy. Connect with her on LinkedIn.
You must have heard this term “power of attorney” in many American television shows such as Grey’s Anatomy, Law and Order, Suits etc.
Have you ever wondered what does this mean?
The meaning of ‘power of attorney is not as difficult as it sounds; it just means a tool through which you can share, with another person the authority of taking decisions on your behalf.
It is a legal tool, basically established to ease your work and reduce the work pressure from your shoulders. It just means that you are permitting someone you chose to make binding decisions on your part. The power of attorney has the power vested in him or her to take steps for you legally, medically and in every aspect.
This device of “power of attorney” is an incredibly important business tool used all across the globe for a wide variety of business and legal purposes.
A person having Power of attorney have the power to do anything that’s specified on the contract on your behalf, which you yourself can do.
The power of attorney enables your agent to take a wide variety of decisions for you, except your instrument of will.
The person having power of attorney can sign bills on your behalf, file and defend law suits on your behalf, file taxes on your behalf, buy and sell real estate such as your house and lands on your behalf, can handle your bank accounts on your behalf. Moreover, he can also take loans on your behalf.
The person with power of attorney only cannot create your will.
The person with power of attorney can also not modify or amend or revoke your will. The person with power of attorney can make a statement directing selling the property and other assets.
If you own a business or a startup or work in one, you may want to advise delegation of non-essential work via power-of-attorney, as it helps cut costs. Non-delegation of unimportant work is essentially a huge business mistake.
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History and Origin of Power of Attorney
The word attorney has a French origin and so does the concept of power of attorney. But, back then the power of attorney didn’t have that typical meaning. It simply meant delegation of power from the principal to the agent.
In the Romanian history there was a concept of consensual gratuitous contract known as “Mandatum”. No payment or remuneration was given to the agent or the power of attorney. There were no codified laws for this kind of contract of agency.
This kind of arrangement was sometimes conditional and sometimes unconditional. The power of attorney kind of system used to be governed by the doner or the principal. The principal was not allowed to do delegation of power for illegal acts.
Types of Power of Attorney
There are 5 types of Power of Attorney-
- Durable power of attorney
- Medical power of attorney
- General power of attorney
- Limited power of attorney and,
- Springer power of attorney.
The person can decide the limitations of the delegated power attorney. The authority or the power can be specific and limited to general and broad.
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Durable Power of Attorney
In this kind of power of attorney, the person having power of attorney continues to have the power of attorney, even when you become incapacitated.
In the in capacitated state a person is not able to take decisions for him or her self , usually in this situation the power of attorney is revoked , but in case of durable power of attorney, even when the doner is in the incapacitated state the person having power of attorney continues to have and it is not revoked until the completion of all the tasks.
Durable power of attorney is rescinded when the person whose power of attorney was transferred, dies or voluntarily rescinds the power of authority when he or she is in a competent stage, by signing Revocation of Power of Attorney Form.
Non-Durable Power of Attorney
In this kind of power of attorney, all the authority and power which the agent with the PoA has, rescinds automatically when the delegator or the doner dies or becomes incapacitated.
In this kind of power of attorney, the court assigns a legal representative or make someone responsible for the acts to be done for the deceased or incapacitated or incompetent person.
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Medical Power of Attorney
In this kind of power of attorney the person having power of attorney is responsible for making all the decisions relating to the health care on your behalf.
If you fall ill, then the person having your medical power of attorney will take all of the decisions relating to the doctors and other medical procedures. The person having your medical power of attorney basically is your health care agent who takes care of your medical or Healthcare wishes.
The person having medical power of attorney basically takes care of the medical services provided to you and the doctors treating you and all of your other related wishes and requirements. Having a medical power of attorney reduces the pressure and work on your family members.
The medical power of attorney’s are provided by courts and these are also provided by the hospitals. You can easily. A medical power of attorney by going to the department of human services website and applying there. You can also choose your medical power of attorney by your choice instead of going through a government platform.
The medical power of attorney is not in anywhere responsible for any of your medical or other debts. You can have a medical power of attorney for all of your life but the role of medical power of attorney comes in to play when you are incompetent or medically incapacitated.
This incapacitation may be temporary and, in this time, your medical power of attorney will take decisions on your behalf and those reasons will be considered as you yourself has taken that decision. So, this is very important to choose right person for this role.
To appoint a person for medical power of attorney it’s not necessary that he is a lawyer. All that is required is,
- that he is an adult,
- has a sound mind and,
- is competent as per the laws governing him.
The person having Medical Power of Attorney is responsible to convey your wishes to the medical authorities which includes –
- DNR forms
- Aggressive treatment procedures
- what to do when you have entered into a Coma,
- force feeding food and water through tubes and pipes and
- whether you want to be kept alive by a ventilator and for how long etc.
The person having your medical power also decides the kind of surgical procedures you will undergo after consultation with your doctors and whether after your death you want to donate your organs including the choice of organs which you don’t want to donate, as well as, if you want other people to know about your death or procedures or any other thing .
All these matters relating to your health are handled by your medical power of attorney.
General Power of Attorney
In this kind of power of attorney the authorised person can take all the decisions related to Civil matters.
The person who has the general power of attorney is also known as agent who acts on the behalf of principal. The principal gives the right to the agent to handle some of the matters or all of the matters.
The person having general power of attorney takes care of the banking transactions, transactions relating to real estate those are buying and selling of house buying and selling of land and other properties.
The person having general power of attorney can also enter into a contract on your behalf. The person having general power attorney acts on the behalf of the donor or the principal in all the matters as allowed by the principal.
Basically, the role of general power of attorney is much more broader than other kinds of power of attorney, because if you are the principal, you pretty much give your agent the power and authority to take decisions on a huge portion of your civil life. Of course, you may limit the power of attorney to aspects which you need to delegate, and in practice you should do that too.
The decision taken by the person having general power of attorney is binding on the part of principal and are considered as if the principal himself has agreed to the terms and conditions.
The person having general power of attorney in any case is not held responsible for the debt burden on the principle when that person was not acting as the power of attorney. The person having general power of attorney can also obtain license for the businesses and other permissions.
Any person can be appointed as the general power of attorney but the person having general power of attorney should take care of very important matters as real estate Banking and Finance and the principal should think very carefully before framing a contract, giving this authority to someone.
Even corporations can be appointed as agents via power-of-attorney. If you want to set up or expand your business in India or localize your business for the Indian market, it is recommended you use this practice, albeit carefully.
Limited or Special Power of Attorney
In this kind of power of attorney, the person having The Limited or special power of attorney has only limited or specific powers to act upon. The Limited power of attorney is just the opposite of general power of attorney.
The Limited or special power of attorney is created by the principal for only specific purposes.
The person having Limited or special power of attorney can only take decisions exactly defined by the principal.
For example, a person appointed a special power of attorney to do contracts of a specific nature on his behalf, then that special power of attorney will only able to make contracts relating to that nature.
That person having the Limited power of attorney cannot do anything else rather than making contract of that specific nature on behalf of the principal and also it won’t be binding on the principal to do so.
The person having Limited Power of Attorney has only specific power or authority. Most of the Limited or specific or special power of attorney are appointed or are delegated powers to perform legal actions.
The person having Limited power of attorney can sign legal forms on behalf of the principal. This Limited power of attorney can also be appointed for particular transaction such as selling your house, buying land etc.
This kind of power of attorney can also be used when a person is going outside the country and needs stuff to be done during the time. Then that person having Limited power of attorney can make decision on your behalf and take calls related to the affairs that you have delegated upon him to do.
Unlimited power of attorney can also be restricted by time.
You can also decide the time period of a limited power of attorney.
For example, if I am relocating to a different country and I need to sell my house, car and other properties within three months, I can assign all these duties to a person under a Limited power of attorney that has a time-limit for completion.
Then, that person who has Limited power of attorney will have to sell my house, car and other properties and the power of attorney is going to get over after three months, despite of whether he was successful as per the contract or not.
A person can appoint various Limited power of attorney. A person can appoint different power of attorney for different acts.
Springer Power of Attorney
Springer power of attorney is the kind of power of attorney which is inactive during the normal course of time but becomes active when the principal is absent or becomes incapacitated temporary or permanently.
The person having Springer power of attorney does not need to do any act when the principal is active; his role comes into play when the principal is unable to act on his own.
For example, a person is appointed as a Springer power of attorney. Now the principal is acting on his own, but after sometime, the principal goes into a coma. Now the person who has Springer power of attorney, will act on the behalf of person who went into coma for matters he has been appointed to work on.
You can appoint someone as your springer power of attorney but his role won’t come into play unless and until it fulfils the criteria that you prescribe in the document of your power of attorney certificate or form.
How to Register and Revoke Your Power of Attorney
Registering or revoking a power of attorney depends upon the laws of the country you’re in.
Since laws of two countries are never the same, this also varies for different countries.
We will be updating a list of how you can register and revoke your power of attorney, so that you can do it without having to hire a lawyer.
Benefits of Having a Person as your Power of Attorney
Nowadays, almost each and every person is busy with his or her own work. In a busy schedule it is difficult for a person to handle other mundane affairs such as regular bank transfers or side-business finances.
Also, power of attorney helps you delegate matters on which you have limited expertise such as legal work or handing over a power of attorney to a real estate developer who wants to build a property over your land.
If you are not able to handle your bank transactions properly due to lack of time, then you can give the authority to someone else to do this kind of work on your behalf and you can focus on other more pressing matters.
If you are unable to understand the nuances of legal issues or you can’t draft legal documents for your business, then you can hire or appoint a person and give him the power of attorney to handle all your legal matters.
If you think that you are going to be ill and you feel that you need someone to take medical decisions on your behalf, then you can have someone to take decisions relating to medical care and health care. All you need to do, is sign a power of attorney in favour of the person, whom you choose to appoint.
The biggest benefit of having another person as your power of attorney is reduction of workload. You can revoke or terminate the power of attorney whenever you wish to, subject to the provisions of the contract with your agent.
So, there is nothing compulsory in this kind of contract.
Risks of having a Person as Power of Attorney
There is some risk to whatever legal contract you sign. But in case of signing a power of attorney, you carry the risks, of a principal-agent relationship.
The person whom you have given all the power and authority as your agent may misuse that power and mismanage your finances incurring debt.
For example, you have given power of attorney to a person to handle your real estate matters. Now that person has sold your house to someone and that too at a very low price.
Now as he was your agent authorised under a power of attorney, that transaction is binding upon you and you can do nothing against it. It is very necessary to properly choose the person to whom you are giving power of attorney very carefully because there is a lot of scope of misuse and fraud.
When you are choosing a power of attorney make sure that person is a capable person. If it is possible then give your close friend or other family member, or even a person who cares about you, the power of attorney.
The selection of person whom you are making power of attorney should be done very cautiously because the acts done by him will be binding upon you and not him.
Even he, won’t be made liable for the debt that he has created, because he acted as your agent.
The perks of making someone power of attorney are much more than the risks. So, take precautions but don’t worry while hiring a person as your power of attorney if the person is capable (financial manager/ lawyer/ real estate developer).
If it makes your life easy and professional life more proactive, then go for it.
For any queries or help with your startup, feel free to book a free consultation with us. You may also check out our list of services if you need any help with your business efforts.
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