Introduction to Power of Attorney

SUBMITTED BY:
SUBMITTED TO:

Name: Raj Vardhan Agarwal PROF.CHANPREET KAUR

Enrollment no.- A90821517066

Subject: Power of Attorney

Subject : LAW216

Program – B.B.A LL.B(H)

Batch – 2017-2022
 Table of Content

What Is a Power of Attorney?..........................................................................................................3

Need of Power Of Attorney...............................................................................................................4
Types of Power of Attorney..............................................................................................................5
Durable Power of Attorney...............................................................................................................6
Special Considerations......................................................................................................................6
 What Is a Power of Attorney?

A power of attorney (POA) is a legal document giving one person (the agent or attorney-in-
fact) the power to act for another person (the principal). The agent can have broad legal authority
or limited authority to make legal decisions about the principal's property, finances or medical
care. The power of attorney is frequently used in the event of a principal's illness or disability, or
when the principal can't be present to sign necessary legal documents for financial transactions.

A power of attorney can end for a number of reasons, such as when the principal dies, the
principal revokes it, a court invalidates it, the principal divorces his/her spouse who happens to
be the agent or the agent can no longer carry out the outlined responsibilities.

Conventional POAs lapse when the creator becomes incapacitated, but a “durable POA” remains
in force to enable the agent to manage the creator’s affairs, and a “springing POA” comes into
effect only if and when the creator of the POA becomes incapacitated. A medical or healthcare
POA enables an agent to make medical decisions on behalf of an incapacitated person.

Need of Power Of Attorney

There are numerous reasons why someone would authorize another person to act on their
behalf. Depending on the principal's state of residence, multiple types of powers of
attorney may be required. The most common types of powers of attorney include the
following:

 Medical power of attorney – This document grants the attorney-in-fact the power
to make medical decisions  for the principal. A medical power of attorney becomes effective
only when the principal cannot make decisions about their own medical care. A  medical power
of attorney is required in some states rather than a durable power of attorney.

 Financial power of attorney – In this document, the principal gives their authority to
their attorney-in-fact to make financial decisions on their behalf. The powers may be limited to
certain transactions such as real estate transactions, representing the principal at an  IRS audit,
or making all financial decisions on behalf of the principal. A financial power of attorney may
be classified as a durable power of attorney, meaning it is still valid if the principal becomes
incapacitated. Like a non-durable power of attorney, should the principal not suffer any
incapacity, the power of attorney survives until the death of the principal.

 Springing power of attorney – These powers are triggered by a specific event and
may grant the attorney-in-fact limited powers or broad powers. In nearly all cases, the power of
attorney becomes effective when the principal is unable to act on their own behalf for any
reason including illness, injury, or incapacity. A springing power of attorney  is often used as
an estate planning tool. This gives the principal more control over when the authority to act
starts.

Types of Power of Attorney

A power of attorney is a very important estate planning tool, but in fact there are several different
kinds of powers of attorney that can be used for different purposes. Before executing this crucial
document, it is important to understand what your options are.

A power of attorney allows a person you appoint -- your "attorney-in-fact" or agent -- to act in
your place for financial or other purposes when and if you ever become incapacitated or if you
can't act on your own behalf. There are four main types of powers of attorney.

 Limited - A limited power of attorney gives someone else the power to act in your stead
for a very limited purpose. For example, a limited power of attorney could give someone
the right to sign a deed to property for you on a day when you are out of town. It usually
ends at a time specified in the document.
 General - A general power of attorney is comprehensive and gives your attorney-in-fact
all the powers and rights that you have yourself. For example, a general power of
attorney may give your attorney-in-fact the right to sign documents for you, pay your
bills, and conduct financial transactions on your behalf. You could use a general power of
attorney if you were not incapacitated, but still needed someone to help you with
financial matters. A general power of attorney ends on your death or incapacitation unless
you rescind it before then.
 Durable - A durable power of attorney can be general or limited in scope, but it remains
in effect after you become incapacitated. Without a durable power of attorney, if you
become incapacitated, no one can represent you unless a court appoints a conservator or
guardian. A durable power of attorney will remain in effect until your death unless you
rescind it while you are not incapacitated.
  Springing - Like a durable power of attorney, a springing power of attorney can allow
your attorney-in-fact to act for you if you become incapacitated, but it does not become
effective until you are incapacitated. If you are using a springing power of attorney, it is
very important that the standard for determining incapacity and triggering the power of
attorney be clearly laid out in the document itself.

General Power of Attorney

This is a written authorization document where a person (“Principal” or “Donor”) confers

authority to another person (“Attorney”, “agent” or “Donee”) to act on his behalf in matters of
property, business affairs, financial and Banking transactions, legal matters etc.
This document empowers the Attorney to represent the principal in various matters when the
latter is out of country or old and incapacitated or even otherwise not able to take care of one’s
property and finance etc.
Power of Attorney can either be in general or limited to a specified purpose. Where the principal
is unable to attend various dealings, he appoints an Attorney to perform the required actions on
his behalf.
Always grant power Attorney to a trusted aide or family member. This document can have
negative consequences if the power is misused by the Attorney. Use this utility wisely. In India
the Power Of Attorney Act, 1882, frameworks and guides this type of arrangement.

Durable Power of Attorney

If you make a durable Power of Attorney or specify the durability factor in the deed, it simply
means that the powers of Attorney will remain effective if the principal becomes incapacitated.
Generally, the powers of the Attorney are nullified if the principal is incapacitated if the durable
condition is not included.

When to use?

 When you’re looking for an aide to represent you in important matters

 When a person is unwell and is not in a position to carry out critical transactions
 When a person is abroad and wants to appoint an abettor to assist in domestic business
  If you’re preoccupied with other appointments and are unable to concentrate on a
project/task

What does it cover?

 Attorney’s powers related to conducting business

 Real estate and property matters
 Selling & Buying investments, operation of bank accounts
 Power to enter into agreements and registrations
 Other basic and vital clauses

Special Power of Attorney

Appointing a special power of attorney means legally authorizing another person, called an agent
or an attorney in fact, the right to act on behalf of another person, known as the principal, under
specific, clearly laid-out circumstances.

Special power of attorney is also called a limited power of attorney. In the financial world,
limited power of attorney, or LPOA, gives a portfolio manager the authorization to perform
certain functions on behalf of a client in that client’s account.

[Important: By writing a letter authorizing a special power of attorney, an individual is

giving another person the legal right to make decisions on their behalf.]

Special Considerations

Under the common law, a power of attorney becomes ineffective if its principal dies or becomes
incapacitated, meaning the principal is unable to grant such power due to physical injury or
mental illness. However, a special power of attorney can be made durable.

A durable power of attorney is one that authorizes the agent to continue acting on behalf of the
principal even after the principal becomes incapacitated, for instance, due to a head injury or
Alzheimer’s disease. Under a durable power of attorney, the authority of the agent to act and
make decisions on behalf of the principal continues until the principal's death. For an individual
who does not already have a durable power of attorney in place and does not have the capacity to
execute a special power of attorney, the court will impose a conservatorship or a guardianship to
act on his or her behalf.

When an individual passes away, the special power of attorney becomes void, and a last will and
testament or trust takes precedence.

Revocation of Power of Attorney

It is important to remember that each state may have specific requirements as to the proper
legal process to revoke a power of attorney . However, in most cases, authority can be revoked
if the principal is of sound mind, has notified the attorney-in-fact that they are revoking their
authority, or if a new person has been named as attorney-in-fact. Regardless of the
circumstances, special care should be taken to ensure the original attorney-in-fact is notified of
the changes.

Revocation can be done in part or in full. For example, if there is a financial power of attorney
in place that provides broad power to a third party, the principal may wish to restrict what the
attorney-in-fact is able to do. The principal could specify that their attorney-in-fact is only able
to pay bills, therefore withholding authorization to open or closed accounts. They may also
have additional authority to purchase and sell real estate or securities. The important thing to
be aware of is that the principal has complete control as long as the original documents do not
restrict them from doing so and that they are in control of their mental faculties.

Once a power of attorney has been revoked, or the terms have been modified, the principal
should ensure that there is no way for their attorney-in-fact to act on their behalf. If it becomes
apparent that the attorney-in-fact has used the authority to accept actions on the principal's
behalf, they should be notified in writing that the power of attorney has been revoked. For
example, if the attorney-in-fact wrote checks from the principal's checking account, transferred
securities from the principal's brokerage account, or had bills transferred from the principal's
mailing address to their own, the proper steps will need to be taken to ensure the appropriate
parties are notified of the change.