The Pros And Cons Of The Power Of Attorney

Having somebody take care of your business dealings can be real nice. Just think about it. You don’t have to go to your business meeting in say Uganda to sign documents. You can just send a representative with the power of attorney and that person can sign the contract for you. But for all its benefits, the power of attorney can also be a bane when not done the right way and when put into the wrong hands.

What is a power of attorney?

Before we can discuss the advantages and disadvantages of using a power of attorney, you must first understand that exactly is the concept. Power of attorney is a document that gives people the authority to act on another person’s behalf for a specific period and matter depending on what is stated on the paper. This means that another person can sign documents for you and make decisions on your behalf. The person who gives the power of attorney is often called the principal while the grantee is called the proxy or sometimes the agent.

Use of the Power of Attorney

Power of attorney is used within corporations where executives have tightly packed schedules that require them to travel in three different countries in a span of three days. This can either be physically impossible or at best, physically tiring. Thus, the power of attorney serves to lift the burden from the executives, allowing them to become more productive. Company lawyers are often sent or subordinates who are trusted to make decisions and sign the contract.

Another advantage of a power of attorney is its importance in making healthcare decisions. A power of attorney can also be given to people, authorizing them to refuse or allow medical care to the principal if they become incapable of making decisions for themselves. This also includes making the decision to pull the plug in cases when only a machine is keeping the principal alive.

Some people are also given the power of attorney to take care of a principal’s financial portfolio. Although this is well and good especially when you are so busy and want to put the business of investing your money to a professional. But money can turn people dishonest. And here lies the one disadvantage of a power of attorney— putting your trust into one person.

On the downside

Remember that in giving a power of attorney to someone, you are basically telling people who read the document or the contract that you are giving the agent full rights to sign for you and agree or refuse something on your behalf. If the agent turns out to be corrupt, then any transactions that he or she handles is at risk for fraud. This is why although this is a very convenient thing to do; only a few ever use it. Giving that kind of power to one person can be very risky even if you plan to monitor all the transactions made under your name.

Choosing an Agent for your Power of Attorney

By now you should know that when you get a power of attorney to authorize somebody else to execute your decisions in case you fail to do so, you need to find the right person to whom the authority would be bestowed. As a principal, you need to find your agent or attorney-in-fact. He or she does not need to be a lawyer. The agent could be just about anyone. However, you need to be very careful when choosing an agent for your power of attorney.

The agent you would designate for your power of attorney would assume specific responsibilities and duties. Most importantly, the person should always act for your best interest. By this, it means that the agent you are appointing should always intend to follow your instructions. He or she should be ‘fiduciary.’ Thus, that person must always act with the highest possible degree of good faith on your behalf.

Your agent still has the freedom to do whatever he/she likes to do even if he/she is supposed to always make decisions for you. The law mandates the person to use your money and assets only to uphold your benefit. But he/she could freely make several inappropriate acts with regards to your money. That is why it very important to choose and appoint a person whom you fully trust. You should not appoint just about anyone. Before you choose an agent of an attorney-in-fact for your special power of attorney, it would be best to ask yourself the following questions first.

Do you trust the person?

The best thing you should establish is trust on the person you are appointing as an agent. Unfortunately, trust is something earned over time. You have to make sure the person you choose is trustworthy.

Does the person truly understand your feelings?

He/She should know you well so as to understand your own points of view and opinions. If you think that person really understands your feelings, you could be sure he/she would follow and stick to your personal wishes if ever you get incapacitated.

Would the person be willing to spend time to handle your affairs?

We are all busy. Perhaps, the person you are appointing as your attorney-in-fact could be busier than you are. It is important that the person be able to spend much time to handle your affairs and work on your behalf. If not, you would be in trouble.

Is the person easily available?

Appoint an agent or attorney-in-fact who is easily accessible or available. This is to make sure he/she would always be there in cases of emergency. The person need not be personally present to attend to your errands all the time but at least he/she should be easily contacted through the phone.

Does the person know about handling finances?

You are entrusting your money and assets to the person. It is important that you appoint an agent who is well skilled and knowledgeable in handling and managing finances. If he/she is not, at least he/she should be willing to seek appropriate help from the experts. Your power of attorney would give the person the authority to handle your financial affairs. Make sure you are entrusting it to a prudent and wise person.

Frequently Asked Questions about Power of Attorney

If you are considering getting a power of attorney, you should fully understand what it is all about. In general, it is a legal requirement that you be in a competent and normal state of mind when getting a power or attorney or appointing a person to be your attorney-in-fact. However, it could be very hard to prove that you are not well when you do so. It would be safe to get that document even if you are in the pink of health or even if you do not foresee any event that would make you unable to handle your affairs.

There are several frequently asked questions about this subject. It would be wise to be more familiar about power of attorney to fully understand how it could be of best use for you.

Do I need to appoint a lawyer as an agent?

The agent is also usually called the attorney-in-fact. You could appoint a lawyer as your agent. However, it is not a requirement. In fact, you could appoint just about anyone (in legal age) as your attorney-in-fact. The appointment and authorization should be clearly stated in the legal document (a power of attorney is actually a legally effective document).

How is the power of attorney created?

You need to completely fill out a specific power of attorney form. It should state yourself as the principal and identify the agent you are appointing to take authority on your affairs if you become unable to do so. Of course, it is a requirement that your appointed agent agree to take the authority you are giving. The document should be duly witnessed by a lawyer or a notary public. For the durable power of attorney, you should seek guidance from your private lawyer when doing the provisions or content of the document.

Is it possible to make a power of attorney if I get mentally incapacitated?

It is not in any way possible to do so. As mentioned, there is a requirement by law for you to fully understand what you are getting into for the document to take full effect. It is advisable that you make a power of attorney even if you do not feel any illness or you do not expect any event that would incapacitate your mental state. It is always ideal to be prepared.

Could the power of attorney be revoked?

Of course, it could be revoked especially if you are no longer comfortable about the kind of service or performance your agent is giving you. Be reminded that it is your right to revoke any authority you provide a person through a power of attorney anytime. You should accomplish a revocation form and distribute copies to all institutions and agencies that could be concerned with transactions, including hospitals and banks. Your agent should also formally receive a copy of that revocation.

As for the durable power of attorney, you could do two actions. First, you could get into a new durable power of attorney to name a new person as your attorney-in-fact or agent. Second, you could decide to handle all your own affairs.

What are the Different Types of Power of Attorney?

You will never know what to expect in the future, so it pays to prepare everything before the going gets tough. That includes planning how to and who will handle your finances, business, and other personal matters should you become unable to do so. This is where the power of attorney comes in. It is a document that allows a person to grant legal authority to another person to make decisions regarding finances, business, medications, health care, and other personal affairs on his or her behalf.

In general, a principal can choose from four types of powers that he or she can give to his or her agent (also called the attorney-in-fact).

The right type to choose depends on the extent of power you want to bestow on your agent. It also depends on when you prefer to start appointing such power to your agent as well as when you want the power terminated. 

1. General - This legal document allows the attorney-in-fact to act for the principal in almost every aspect of his or her life. It even authorizes the agent to gain access to the principal’s safety deposit boxes or to handle all the properties of the principal.

The effectivity of this document ends when the principal dies or becomes mentally disabled. Because of its seemingly unlimited nature, the general power must be considered thoroughly before it is given to another person. It is advised that this type of power be used sparingly because it is prone to abuse and misuse of power by the agent. 

2. Limited - This document, in contrast to the general type, authorizes the agent to make decisions for the principal on particular affairs for a limited time. That means the authority ends at the period indicated on the document. Just like the previous legal document type, it also ends at the death, mental illness, or disability of the principal. 

3. Durable - It grants the agent the right to act on the principal’s behalf even after he or she has become mentally incapacitated. Thus, the agent can make crucial decisions for you when you are unable to do so. The document takes effect right after the principal and attorney-in-fact have signed it, and it ends when the principal dies.  

4. Springing - This legal document is created in such a way that it takes effect only after the principal has become mentally disabled. When writing the document, one has to make sure that it clearly explains how to determine the occurrence of the springing event. 

You may also consider using separate powers of attorney to designate another person who will be responsible for your health care and finances. For example, a financial power of attorney allows the agent to perform certain tasks such as handling your properties or paying your bills when you cannot do it, such as when you are out of the country or hospitalized for a brief period.

The legal documents for each authority to be granted must indicate the terms that the agent must follow to act out your needs and wishes.  

Power Of Attorney And Its Validity

Power of attorney can be a tricky thing to do because you are basically giving another person full right to act in your stead in personal and legal matters. This means that the person who you have given the power of attorney to, which is called the “agent” or the “attorney in fact,” will have the right to sign legal documents in your name and even have access to your bank accounts, among other things. Thus, it is important to look into the validity of these powers of attorney and the circumstances when they can become invalid. So if you are thinking of giving a power of attorney, read on.

Because of the sensitive nature of this, power of attorneys are often only given to people that the “principal” ( the person giving the power of attorney to the agent) absolutely trusts. This can be a son or daughter, a parent or other close relations.

Do not be fooled with the name. Anybody can be given the power of attorney, even people who are not lawyers, although most of those who are given such responsibilities are family lawyers of rich people or corporate lawyers of big corporations, whose job entails them to represent the CEOs or the big bosses, which are often required to be in three places at the same time, which is of course, not humanly possible.

Power of attorney often has a scope, depending on the agreement or the dictates of the principal. In most cases, the power of attorney will only have an effect on specific cases or issues. Some will be stating a specific period of time while others will be point to more specific business dealings. For instance, a power of attorney may be granted to sign a business deal with Conglomerate X but will not be effective when signing deals with Conglomerate Y even if they are signed on the same day.

It all depends on the legal papers that accompany the power of attorney. And these papers stating the contract for the power of attorney is required to be shown before an agent can act. Some countries accept oral agreement but others like the United States rely on written documents to deem it legal. Because of the birth of the internet and the computers, powers of attorney sent over the internet or those that are electronically given are accepted in some states and also in some countries.

Remember though that regardless of the period stated on the contract, the power of attorney will be void once the principal dies. When they fall ill, become physically or mentally incapacitated, some power of attorney agreements are honored provided that they have the provision that the contract will still be valid when these things happen. Otherwise, they will also become void.

It is also assumed that the agent will be completely honest and truthful with his business dealings in representing the principal. When he is proven to be dishonest and fraudulent, all the things that he has signed when the power of attorney is still in effect will be deemed invalid.

Power of Attorney 101

We often hear the word “power of attorney” in TV shows and read them in books. The phrase seems to be a moot point already. After all, what other power do attorneys need than the legal ones, given to them when they became lawyers? What exactly is a power of attorney?

Power of attorney does not refer to a “power” intrinsic to the lawyer or attorney. It is actually given to a person even if he or she is not a lawyer. Still, many of those who are given the power of attorney are lawyers, often family lawyers who are trusted to deal with a wide range of things. When you are given the power of attorney, a person is authorizing you to act on their behalf in personal and business matters that have legal issues. They can sign your documents and decide for you while you are away or incapable of making decisions yourself.

Although the word attorney is a synonym to a lawyer, in United States, it is mostly used to refer to these people who are given the power of attorney. They are also called agents because they also serve as liaison officers and go-between or more formally, attorney-in-fact because they are only licensed by a common person.

Because it can have legal consequences, the transfer of power or the authorizing is written as a legal contract, which is shown to people before the “attorney-in-fact” can proceed with his dealings on behalf of the client or the principal. Often, when the attorney-in-fact is being paid, a separate contract is drafted for the payment and is not shown to other people. A principal must of course be of a good mental state when giving the power of attorney.

Principals who are physically injured, sick or mentally unhealthy are deemed incapable of giving power of attorneys. When power of attorneys are given under these circumstances, all the legal documents the “agent” signs or agrees to will not be honored in court and will be deemed ineffective. Also, the scope of the power of attorney will also become ineffective when the principal dies or becomes incapacitated, meaning if they suddenly suffer from an illness, physical or mental.

Although some countries accept an oral power of attorney, in the United States, the written contract is still important. Some states also accept the electronic power of attorney as long as the document is proven legitimate and legal. There are different kinds of power of attorney given to people. It may be general or special, which is limited to only one type of dealing or issue. It all depends on the principal. There is also the scope of the power of attorney. Often, it only takes effect within a certain period of time.

As mentioned before, it will not be valid when the principal dies or falls ill unless it is stated in the contract that the power of attorney will continue when illness occurs. This is called the durable power of attorney. When the principal dies, the power of attorney will automatically be ineffective.