What is Power of Attorney?

Power of attorney (POA) is a legal authority given to any person by a designated person, also called a donor, to execute certain private, business, or legal matters on his behest.

A person who attains the Power of Attorney acts as the donor's agent for the purpose for which he is appointed. There is a principal-agent relationship between the two. The doner may assign specific functions to the agent or attorney-in-fact to limit the scope of his powers or provide the agent with unanimous power to take decisions on his behalf in any private matter. 

A Power of Attorney need not be only assigned to an attorney. And it can be assigned to any trusted person, a family member, who would take care of a private business in the same way the donor would. In India, the Power of Attorney document is regulated by the Power of Attorney Act, 1882 (hereafter referred to as the "Act"). 

Types of Power of Attorney

Apart from the Act, the Indian Stamp Act defines Power of Attorney as an instrument that empowers a specific person to act for and in the name of the person executing it. Power of attorney is divided based on the subject matters that the agent or the attorney in fact, has the authorization to deal with. 

General Power of Attorney

under this type of instrument, the donor authorizes to agent to handle any of his private, business, or legal matters without mentioning a specific subject matter in the instrument.

Specific or Special Power of Attorney

under this type of instrument, the donor authorizes the agent to agent to only handle matters associated with a single subject matter. Once the subject matter ceases to exist, the Power of Attorney also ceases. 

Durable Power of Attorney

in general instances, every Power of Attorney instrument will cease to exist once the donor is incapacitated or attains any mental disability because of which the donor has lost the capacity to enter contracts and show explicit and irrefutable valid consent. In this type of instrument, the donor specifically mentions in the document that the Power of Attorney will survive his future incapacity. This type of instrument can have a general or specific subject matter attached to it. 

Power of attorney can be entered into on subject matters like one's health, finances, real estate, business and many more.

How to Draft a Power of Attorney?

A Power of Attorney is a very powerful document that allows the assigned agent to handle the tasks of the donor. Thus, it attracts all the liability a principle would attract for the acts done by the agent. Thus, it is very important to choose the agent or attorney carefully. The law also makes it a regulated process to avoid any reckless instruments from being created. 

A lawyer is not required to make a Power of Attorney instrument, but it is certainly advisable. The donor should acquire the name and details of the parties, decide on what type of instrument is to be made concerning the subject matter and ensure the validity of the instrument and the signature of the donor. It is to be noted that the Power of Attorney is to be signed in the presence of two witnesses and their signatures, it has to be notarized and finally registered with the sub-registrar, and stamp duty has to be paid on it. The stamp duty to be paid varies depending on the subject matter and the type of instrument.

A Power of Attorney shall be considered valid and legal only if it is rightly registered as mentioned in the Registration Act, 1908. A power of attorney can be submitted as valid evidence in court only if it is in writing, attenuated, and executed before the notary or a magistrate as per the Indian Evidence Act.

In short,

• Reach out to a lawyer who will draft a suitable POA as per the situation for you.
• The expert will take the requirements
• As per the details provided, the lawyer will draft a POA.
• The POA shall be signed in the presence of two witnesses.
• The signatures of the witnesses are also required.
• A legal notary will further sign it
• The requisite Stamp duty is to be paid as per the state laws.

Documents Required

•  Details of the parties;
• Powers that are being handed over to the agent;
• Validity of the POA;
• Signature of the donor.

Why is it essential to have a Power of Attorney?

Your family would not immediately have access to making your statements when you become debilitated. Families may go through lengthy, stressful procedures without a power of attorney to make their judgments that may significantly influence both you and your family. 

Not to say, if you do not designate anyone if you become ill and you have no choice about who has authority, the court has the right to appoint someone on your behalf.

Risks involved in forming a Power of Attorney

Some risks are involved in a POA. It gives a high amount of power over the principal's finances or estate to someone else, i.e., an agent, without proper accountability.

Misuse of the POA can be done in many forms:

• The POA has been documented in a false and forgery manner.
• The agent could pressure the principal for authority that the principal does not want to grant.
• The agent may spend money on himself instead of spending it on the principal.
• Your agent might do things that you have not authorized him to do, such as making unnecessary transfers, changing the retirement plans' nominees, or insurance policies.

CONCLUSION

A Power of Attorney is a very convenient instrument that allows individuals to delegate duties to their agents to attain the best results. The agent is authorized to execute bonds, contracts, deeds, Mortgages, notes, money drafts, etc.; they can manage, compromise, settle and engage in matters related to real estate, collect rents, grants, sell or borrow or mortgage, file tax returns, insurance forms, institute suits on behalf of the donor and so on.

The agent is bound by duty not to exceed the authority enshrined upon them by the donor. For this, it is essential to appoint an agent who would be trustworthy, reliable, and accountable to execute such business of the donor rightfully.

FAQs

What is the main purpose of POA?

POA is an authority imposed on an agent by the principal allowing the agent to make decisions on his behalf. The agent can receive limited or absolute authority to act on health, finances or property decisions.

Who can be appointed as POA?

A trustworthy person, who is above 18 years, and has sound. Before concluding a person as a POA, it is essential to consider the value system and character of the person.

Can a family member override a POA?

If the agent is not acting properly, family members can file a petition in the appropriate court challenging the decision. If the court finds the agent is acting improperly, the court can revoke the power of attorney and appoint a guardian.

Can POA sell a property? 

This document grants temporary power. There are certain powers that the agent is given for a certain period of time or until the power is revoked. In this document, the agent is authorized to sell real estate, estate a house, a farm, some land or other real estate.

Which Act governs POA?

The Power of Attorney Act is the sole law that governs POA. Further, certain provisions of the Civil Procedure Code, Indian Stamp Act, Indian Evidence Act and Indian Registration Act mention POA.

About The Author:

Adv. Prerana Dey is a dedicated lawyer with a robust legal practice spanning various domains, including civil, criminal, consumer, and matrimonial law. She completed her LLB and began practicing law in 2022. Over the course of her career, Prerana has gained substantial experience and a reputation for her commitment to justice and her clients.