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On Behalf of | Aug 5, 2015 | Wang IP Law Blog

In the event that you are incapable of making decisions for yourself, assigning the power of attorney to a trusted relative or loved one is important in protecting your assets. The power of attorney is a legal document where an individual, also known as the principal, can appoint another individual to act on his or her behalf. The appointed individual is referred to as the “attorney-in-fact”, and has the legal authority to make decisions for the principal – in private, business, and certain legal matters – when he or she is unable to.

Legal Requirements

In order for the attorney-in-fact to be valid, the correct procedure must be followed. First, the principal must be mentally competent and capable of understanding the implications of the document. Since the attorney-in-fact has the ability to handle all of the principal’s finances, it is important that the principal understands the power that is being handed over. The principal must also be acting by choice and without pressure from anyone. Secondly, there must be at least two witnesses during the signing of the document. The witnesses must be adults that are not related to the principal and the attorney-in-fact. These requirements are important in protecting the principal from mistakenly appointing an attorney-in-fact.

Generally, the power of attorney is “durable”, meaning that it is valid throughout the principal’s life, whether they are healthy or not. The document terminates when the principal dies and ends the power of attorney. After the death of the principal, the attorney-in-fact cannot handle affairs such as funeral arrangements or transferring property to heirs.

On the other hand, a “springing” power of attorney takes effect only when the principal is in a state in which they are unable to make decisions for themselves. Once the principal is incapacitated, the attorney-in-fact will be in charge of the principal’s responsibilities.

Disputes Over Power of Attorney

The most common power of attorney disputes occur when the attorney-in-fact is suspected of putting their personal interests over the interests of the principal. A claim can be brought against the attorney-in-fact by either the principal or the principal’s family. The attorney-in-fact may be accused of self-dealing, meaning they took advantage of principal’s assets for their own benefit. If the principal is incapacitated, their family members can argue that the principal was not in the right state of mind during the drafting and signing of the power of attorney document. If the principal is alive, he or she has the ability to revoke the power of attorney at any time.

It is important to pick a trustworthy individual who will receive the power of attorney. To avoid complications over power of attorney, the document should be drafted to clearly convey the principal’s objectives. Following the correct procedure in handing over power of attorney is crucial to guarantee that one’s assets will be protected.