Power of Attorney (POA)

Overview of Power of Attorney

A Power of attorney is a crucial Document amongst various legally important Documents for giving authority to some person to do/manage a certain act, property, finances, business or medical affairs, etc on behalf of the real owner. There are two parties to an agreement of power of attorney. The person who makes a PoA and appoints another person to act on his/her behalf is called a principal/ donor/ grantor and the person to whom such authority is given is called an agent or a power of attorney holder.

It depends on the principal to give extensive or limited rights to the attorney holder with regard to decision-making of the work/responsibility given to him.

Types of Power of Attorney

The power of attorney is categorized into 4 types based on the level of responsibility being delegated to the holder. These are as follows:

Conventional Power of Attorney

A conventional power of attorney is called a general power of attorney or limited power of attorney. Under this, the power given to the attorney holder is limited to performing acts not prohibited by law and principal. It is given for a specified period of time. An attorney holder has the right to make personal and business decisions under this type.

For example: The principal can give a right to the agent for selling a plot owned by him on behalf of him when he is not in the city.

Durable Power of Attorney

Such a power of attorney is drawn in favour of an agent for the lifetime of a principal. Under this type, the agent has the authority to take decisions on behalf of the principal in cases the principal becomes incapable of taking such decisions on his own. A durable power of attorney comes to an end after the principal has died or the same has been cancelled by the principal himself.

For example: A principal can appoint an agent for managing his business finances.

Springing Power of Attorney

This type of power of attorney gives power to the agent to act on behalf of the principal for an event, time period or condition. The agent has the right to act on behalf of the principal when the principal losses his legal capacity to perform an act.

For example: If an armed personnel has a duty to protect the nation by living overseas for a specific time, he can appoint an agent for the purposes of managing his finances for such a period.

Medical Power of Attorney

This type of PoA comes under both a springing PoA and a durable PoA. A principal makes a medical power of attorney for healthcare purposes. Such a PoA comes into effect only after the principal becomes incapable due to unsound mind and body.

For example: An agent has the right to pay off the principal's medical expenses.

A Person Eligible to Become a Power of Attorney Holder

It is very important for a principal to choose a trustworthy power of attorney holder for the desired purpose. Thus, a person to become a power of attorney holder has to be:

• A major (a person who has attained the age of 18 years)
• A person having a sound mind

Even if a person qualifies for the above-stated criteria, it is important to consider other attributes of the person such as his character and values. The person who is being chosen as an agent must have good decision-making skills without spending much time.

The appointed agent should not mix his personal bank account details with the principal's account details. The agent should not enter into agreements which might create a conflict of interest.

Can a Principal Appoint More than One Agent?

Yes, a principal or a grantor has the right to appoint more than one power of attorney holder. The principal can define the powers of all the attorney holders with regard to joint and separate decision making authority.

If a person appoints multiple agents for a purpose, it will help him in making a good decision after considering all the perspectives of the agents. It helps in ascertaining the advantages and disadvantages while making a decision. However, the appointment of multiple agents might affect the decision-making negatively as the opinion of all the agents with regard to a specific topic might differ and cause delays in making a crucial decision.

Also, a prudent person might appoint multiple agents as a backup if any of the agents falls sick or is unable to perform his duties.

Revocation of Power of Attorney

A power of attorney can be revoked or cancelled by the principal at any time as long as he/she is of sound mind and competent. It is the responsibility of the principal to inform the agent in writing about the revocation of PoA. The letter of revocation must be duly signed by the principal and such information of revocation must be given to all the interested parties who deal with the agent appointed on the principal's behalf.

Points to Remember While Making a PoA Document

There are certain points which should be kept in mind while making a power of attorney necessary paper for appoint of the agent. These are as follows:

• The principal must ensure that the agent is a major and of sound mind.
• The principal has the authority to give limited or extensive powers to the agent to make decisions on his behalf for subjects like managing, selling, purchasing property, management of healthcare affairs, finances, etc.
• The appointed agent must be trustworthy and should never make decisions against the interest of the principal.
• The principal has the power to decide a start date and end date for the power of attorney.
• The format of the Document must be easy to understand.
• The content of the Document must depict the intentions of the principal.
• It is usually suggested to contact a legal professional for making a power of attorney necessary paper to avoid any legal complexities in the near future.
• The team of qualified legal professionals of Corpbiz can help you in making an effective and well-drafted Power of Attorney.

Contents of a Power of Attorney

A sound and valid power of attorney should contain the following details:

• It should mention the personal details of the principal/grantor. Details such as the name, father's name, age and address of the principal should be stated. A principal is a person who gives authority to an agent to act on his/her behalf.
• After the details of the principal have been mentioned, personal details such as name, age, father's name and address of the agent must be mentioned. An agent is a person to whom such authority has been given by the principal.
• A paragraph containing the scope of authority given to the agent must be mentioned. Powers such as entering into legal contracts, management of finances, sell and purchase of a property are a few tasks for which a PoA is made.
• The power of attorney Document must contain the time period for which the agent has the power to exercise his authority over the tasks assigned by the principal. A PoA can be made till the lifetime of the principal or as the time specified by him.
• A valid PoA contains a signature of the principal and the witnesses in whose presence the Document has been signed by the principal.
• A principal can insert a revocation clause. It contains a statement about the power of the principal regarding the revocation of the authority given to the agent.
• A PoA Document needs to be notarized as per the legal requirements mentioned in some states.

Sample Format of a Power of Attorney

There is a sample format of a General power of attorney made by a principal for managing/selling his property through an appointed agent.

GENERAL POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS THAT, I Mr. ABC S/o Mr. XYZ residing at Plot No.2, XY Colony, Mumbai do hereby appoint and authorize Mr. CVB S/o Mr. ACB residing at Plot No.10, XY Colony, Mumbai as my true and lawful General Attorney.

Whereas the principal has the absolute title and possession of property number 16 measuring 1000 square yards situated in BHY Colony, Mumbai. The same has been stated in the sale deed No. 12321. The said property is herein referred to as the “property”.

Whereas I am not able to manage and look after the property on my own, so I hereby authorize my appointed agent to do the following actions regarding the property on my behalf:

• To manage the property on my behalf and represent me before the respective authority concerning the property.
• To contact any government authority for the transfer of the property in name of another person and to provide the physical possession of the said property.
• To oblige with any taxes or dues pending in respect of the said property on my behalf.
• To enter into an agreement concerning the sale of the property with the potential buyer and to receive earnest money on my behalf.
• To execute the sale and get it registered before the competent authority by receiving full payment in his name or my name.
• To perform all other required tasks, deeds and other things not mentioned in the deed and are related to the property. The act performed will be considered as performed by me if I was present.

IN WITNESS WHEREOF, THIS GENERAL POWER OF ATTORNEY HAS BEEN SIGNED BY ME IN MUMBAI ON 6^TH DAY OF MARCH OF 2021 IN THE PRESENCE OF THE FOLLOWING WITNESSES WHO HAVE ALSO SIGNED BELOW :

Signature of the Executant

WITNESSES

Stamp Duty for Power of Attorney

The law defines a definite amount as a stamp duty to be paid for the registration of a power of attorney if a principal executes a general power of attorney (GPA) in name of his/her family members such as father, mother, son, daughter, wife, husband, brother, sister or any close family relative, etc.

If a principal appoints an agent by executing a general power of attorney (GPA) where such an agent is not his close relative and performs the acts stated in the power of attorney Document for some consideration in exchange, then the stamp duty is calculated considering the market value of the property which is the subject matter or a consideration value, whichever is higher.

How can an NRI Execute a Power of Attorney (PoA)?

If a Non-Resident Indian is willing to purchase or sell a property located in India, he/she can appoint an agent by executing a Power of Attorney. The agent can be appointed for purchasing or selling the property on behalf of the NRI.

Power of Attorney - Dos and Don'ts as an Agent

There are certain dos and don'ts that a power of attorney holder should follow. The list of such acts has been defined below:

Financial and Property Matters

A PoA holder can-

• Purchase, sell or rent out a property
• Maintain and repair the house of the principal
• Manage the bank accounts of the principal
• Pay bills on behalf of the principal
• Manage the investments of the principal
• Purchase a gift on behalf of the principal after following the established rules.

A PoA holder is not allowed to-

• Provide someone with huge financial gifts
• Take decisions on his own with regard to funds
• Mix personal bank account details with the principal's bank account
• Perform any act in conflict of interest of the principal
• Planning of tax payments without proper supervision of a tax professional

Health and Welfare

A PoA holder can-

• Manage the daily routine of the principal
• Make necessary decisions for the medical treatment of the principal
• Make decisions beneficial for the principal
• Keep in mind all the instructions given by the principal

A PoA holder can't do-

• He is not allowed to restrict the freedom of the principal
• The agent is not allowed to make any decisions if the principal is of sound mind.