What Is Power of Attorney and Why Do You Need It?

Updated on : Jan. 31, 2023 - 1 p.m. 17 min read.

What Is Power of Attorney

A power of attorney (POA) is a legal document that grants another person the authority to act on behalf of the person granting the power (sometimes referred to as the agent or attorney-in-fact) (known as the principal).

According to the conditions stated in the POA, the agent may decide what to do and how to do it on behalf of the principal.

POAs might be limited, allowing the agent to carry out only certain activities, or universal, granting the agent extensive authority.

A POA can come in handy in a number of circumstances, such as when the principal is incapacitated and needs someone to manage their financial or legal affairs or while they are traveling abroad.

A POA must be in writing, have the principal's signature, and frequently be notarized in order to be legally recognized.

It is crucial to pick an agent carefully and to spell out any restrictions and the powers being granted in the POA.

There are several types of powers of attorney (POA), including:

General POA: Grants the agent broad powers to handle all of the principal's affairs.
Durable POA: Continues to be in effect even if the principal becomes incapacitated or unable to make decisions for themselves.
Springing POA: Only becomes effective under certain conditions, such as the incapacity of the principal.
Limited POA: Grants the agent-specific powers for a defined purpose, such as managing a single financial transaction.
Health Care POA: Grants the agent the authority to make medical decisions on behalf of the principal if they become unable to do so.
Financial POA: Grants the agent authority to handle financial and property-related matters on behalf of the principal.
Real Estate POA: Grants the agent the authority to handle real estate transactions, such as buying or selling property.

It is important to choose the right type of POA that best suits the needs of the principal and to clearly specify the powers being granted and any limitations in the POA.

How Power of Attorney Works

A power of attorney (POA) works by giving another person (the agent) the authority to act on behalf of the person granting the power (the principal). The POA must be in writing, signed by the principal, and often notarized to be legally valid.

The scope of the agent's authority is defined in the POA document and can range from general powers to handle all of the principal's affairs, to limited powers for specific tasks. The POA can be either durable, meaning it remains in effect even if the principal becomes incapacitated, or it can be a springing POA, which only becomes effective under certain conditions, such as the incapacity of the principal.

Once the POA is in effect, the agent is authorized to make decisions and take actions on behalf of the principal in accordance with the terms outlined in the POA. This can include financial transactions, legal matters, and healthcare decisions, among others.

It is important for the principal to choose their agent carefully and to clearly specify the powers being granted and any limitations in the POA. The agent must act in the best interests of the principal and must not use their authority for personal gain.

Power of Attorney Format

A power of attorney (POA) is a legal document and its format can vary depending on the jurisdiction in which it is executed. However, the following elements are typically included in a POA:

Introduction: This section identifies the parties involved and states the purpose of the POA.
Grant of Authority: This section spells out the specific powers that the agent has, either broadly or narrowly defined.
Durability: This section indicates whether the POA is durable or non-durable, and whether it will remain in effect if the principal becomes incapacitated.
Signature of the Principal: The principal must sign the POA in front of a notary public, who will then notarize the document.
Signature of the Agent: The agent must also sign the POA, either in front of a notary public or as directed by the principal.
Witness Signatures: Some jurisdictions may require witness signatures to validate the POA.

It is important to consult with a lawyer or other legal professional to ensure that the POA is properly executed and meets all legal requirements in the jurisdiction in which it will be used.

Stamp duty on POA

Stamp duty is a tax that is imposed on legal documents, including powers of attorney (POA), in some jurisdictions. The amount of stamp duty to be paid depends on the jurisdiction in which the POA is executed, as well as the value of the transaction being authorized under the POA.

In some jurisdictions, stamp duty is calculated based on a fixed rate, while in others, it is calculated as a percentage of the transaction value. Some jurisdictions may exempt POAs executed for personal purposes, while others may exempt POAs executed by certain groups of people, such as the elderly or disabled.

It is important to check the laws and regulations in the jurisdiction where the POA will be executed to determine the amount of stamp duty that must be paid if any. This information can typically be obtained from the local government or through a lawyer or other legal professional.

General POA vs. POA

"General POA" and "POA" are terms often used to describe two types of powers of attorney (POA).

A General POA is a type of POA that grants the agent broad powers to handle all of the principal's affairs. This can include financial transactions, legal matters, and healthcare decisions, among others. The scope of the agent's authority is defined in the POA document and can be as broad as the principal chooses.

A POA, on the other hand, refers to any type of power of attorney, including a General POA. A POA can also be a Durable POA, which continues to be in effect even if the principal becomes incapacitated, or a Limited POA, which grants the agent specific powers for a defined purpose, such as managing a single financial transaction.

In summary, a General POA is a type of POA that grants broad powers to the agent, while a POA can refer to any type of power of attorney, including a General POA.

By ESHA ARORA

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