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When Is It Appropriate To Have A Power Of Attorney?

Aug 17, 2007
A Power of Attorney is a legal document that authorizes one person to act on behalf of another in the legal or business dealings of the person authorizing the other. This type of document has a lot of relevance when, for example, somebody needs to execute some business or legal matter but is unable to do so for whatever reason. In the absence of the person, another person may be authorized to execute the matter through use of a Power of Attorney, which in common law systems or in civil law systems, authorizes another person to act on behalf of the person so authorizing the other.

The person authorizing is known as the "Principal" and the person authorized is called the "Agent". The Agent may, on behalf of the Principal, do such lawful acts such as signing the principal's name on documents.

An Agent is a fiduciary for the Principal and, as this is an important relationship between Principal and Agent, the law requires that the Agent be a person of impeccable integrity who shall always act honestly and in the best interests of the Principal. In case a contract exists between the Agent and the Principal for remuneration or other form of monetary payment being made to the Agent, such contract may be separate and in writing to that effect.

However, the power of attorney may also be verbal, though many an institution, bank, hospital as well as the Internal Revenue Service of the USA requires a written power of attorney to be submitted by the Agent before it is honored.

The "Equal Dignity Rule" is the principle of law that has the same requirements of the Agent as it does to the Principal. Suppose that the Agent has a power of attorney that authorizes him or her to sign the sales deed of the Principal's house and that such sales deed should be notarized by law. The power of attorney does not absolve the Agent from the necessity of having the sales deed notarized. His or her signature to the sales deed must also be notarized.

There are two types of powers of attorney. One is the "special power of attorney" and the other, "limited power of attorney." The power of attorney may be specific to some special instance or it may be general and encompasses whatever the court specifies to be its scope. The document will lapse when the grantor (Principal) dies. In case the Principal should become incapacitated due to some physical or mental illness, his power of attorney will be revoked, under the common law.

There is an exception; in the event the Principal had specifically stated in the document that the Agent may continue to act on his behalf even if the Principal became incapacitated, then the power of attorney would continue to enjoy legal sanction.

In some of the States in the USA, there is a "springing Power of Attorney" which kicks in only in case the grantor (Principal) becomes incapacitated or some future act or circumstance occurs. Unless the agreement has been made irrevocable, the agreement may be revoked by the Principal by informing the Agent that he is revoking the power of attorney.

Making use of standardized power of attorney forms helps in framing a legally sound and mutually beneficial relationship for Principal and Agent. With the ease of use and ready availability of such forms, it is highly recommended that they be utilized when thinking of granting a Power of Attorney to someone. However, care should be taken not to let unscrupulous persons defraud innocent persons such as the elderly through ill-conceived agreements.
About the Author
Wade Anderson is a CPA and operates DigitalWorkTools.com

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