A power of attorney is a legal document that authorises another person to act on your behalf and handle your affairs.

This person is known as your ‘attorney’.

They are usually a trusted friend or relative – someone who can sign documents, pay bills, access bank accounts, talk with utility companies, etc,, on your behalf.

As a result of the high level of power that you’re vesting in them, you won’t want to allow just anyone to act on your behalf.

The power of attorney is a convenient method of allowing someone to handle your affairs and this can be for a number of reasons, like:

• you go on an overseas trip
• you take an extended vacation away from the normal running of your affairs
• you reach an age where you need assistance

Knowing that you have an attorney that is capable of dealing with your affairs will give you peace of mind – for those times that you are unable to attend to them yourself.

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.

If you want to authorize anyone or any organization to properly handle your affairs while you are unable to do so or while you are unavailable, you should get a power of attorney.

It is a document that summarizes and proves your agreement to give your appointed person (the agent or attorney-in-fact) the authority to act on your behalf.

There are four main types of power of attorney that you could choose from.These types may be functional and useful depending on your need and requirements.

They are:

1. General Power of Attorney
2. Special Power of Attorney
3. Healthcare Power of Attorney
4. Durable Power of Attorney

A general power of attorney is a document that gives your agent a broad authority in handling your affairs. This authority usually includes handling of your banking transactions, purchasing and disposing properties, settling claims, exercising stock rights, entering into deals or contracts, filing tax returns, and buying life insurance. It is usually used to enable your appointed agent the power to handle your important transactions within a specified period when you are practically unable to do them personally.

The special power of attorney provides your agent specific powers. You would decide on those specifics. Unlike the general power of attorney, the special power attorney does not give the agent a broad range of coverage. It only specifies how he/she should act. The document should specify which activities the agent should do. Transactions that are not included in the provisions could not in any way be managed or handled by the person.

The healthcare power of attorney designates the agent as a person who should make proper healthcare decisions for you if you get mentally incompetent or unconscious. If you would not be able to make logical decisions due to health reasons, the agent would be authorized to do so in your behalf. However, take note that the healthcare power of attorney is not the same as a living will, which is a document to express your personal wishes in case you would need life-sustaining procedures.

The durable power of attorney could be a general, healthcare or special power of attorney containing specific durability provisions. In case you suddenly get mentally incapacitated while any of the three kinds of power of attorney is in effect, the durability provision of the document would allow the agent to stay as your attorney-in-fact indefinitely. In the durable power of attorney, you are acknowledging the possibility that you could become mentally or totally incompetent because of any accident or illness. For this power of attorney to take effect there has to be a genuine certification from a doctor to prove the illness.

In every power of attorney you would get into, it is always important to make sure you are choosing and agent or an attorney-in-fact who is very trustworthy and reliable. He/She should be able to uphold only your best interest when doing transactions and making decisions on your behalf. You may fully entrust into him/her the authority and power to handle and manage your money or assets.

Here’s a short video (based on US terminology, but pretty close!) about three types of power of attorney.

Article courtesy of The Age.

A financial enduring power of attorney is a legal document. By signing it, you authorise a person to make financial and legal decisions for you.

The main difference between this and the general power of attorney is that a financial enduring power of attorney is valid even if you become mentally incompetent.

This type of power of attorney is especially useful when you are planning for the future. For example, if you are unconscious in hospital as a result of a car accident, the person you have appointed under an enduring financial power of attorney can make financial decisions for you even though you are unconscious.

What can my attorney do?

Your attorney can make any legal and financial decision that you can make. So if you only want to appoint an attorney for a short time, perhaps you should use the general power of attorney, rather than a financial enduring power of attorney.

Multiple attorneys

Where it is permitted under State/Territory law, if you do this you may be able to decide whether you want your attorneys to make decisions ‘jointly’ or ‘jointly and severally’. ‘Jointly’ means that both attorneys have to agree with the decision they make. ‘Jointly and severally’ means that either attorney can make a decision by themselves.

There are no set rules to say what is the best choice, it depends on your circumstances. For example:

* appointing attorneys to make decisions jointly and severally could be useful if one of your attorneys travels a lot; or
* if you want two people to make decisions for you, and you don’t fully trust the judgment of one of them, then you can appoint them to make decisions jointly.

How long does it last?

This type of power of attorney will last until:

* you cancel it (you must be mentally competent to do this);
* you die;
* you become bankrupt; or
* it is canceled by an appropriate Court/Tribunal.

How do I cancel it?

You can cancel an enduring power of attorney at any time, as long as you are mentally competent. Check whether there are formal requirements in your State/Territory, particularly if there are registration requirements. And don’t forget to tell your banks or other agencies that have dealt with the attorney.