The Power of “Power of Attorney”
Published by Sharekhan Education | December 7, 2020
he Power of “Power of Attorney”
Sagar, dynamic young man, owner of a software Company in Mumbai had an important business deal to sign the following week in Chennai. On the same day, he was scheduled to attend an international business conference in the USA, where he was to receive an award for being a dynamic entrepreneur. The events are equally important to him, what should he do; cancel his US trip or postpone the business deal?
Well, Sagar need not do either. He can go to the USA and attend the award ceremony and at the same time go ahead with his business deal in Chennai. Confused surely you are. How can Sagar be in two distinctly separate places on the same day at the same time?
The power of “Power of Attorney” can help Sagar do so. Sagar can fly to USA and attend his award ceremony while he could authorize someone on his behalf to complete the business deal in Chennai.
What is a Power of Attorney?
A ‘Power Of Attorney’ (POA) is a legal document that empowers a specified person (agent) to act for and in the name of the person (principal) executing it. In simple terms it means that you can delegate your rights in writing to another person, typically a family member or a close friend; someone whom you can trust to act on your behalf. Power of Attorney is useful not only in this scenario but also when someone is ill or incapacitated and needs to make crucial decisions.
There are different types of POAs like the General POA and Special POA to name a few.
- General Power of Attorney: This POA is an open declaration that the principal is giving the agent complete powers to act on his/her behalf. It ends with the death or incapacitation of the principal. As this POA gives unlimited powers to the agent probability of misuse cannot be ruled out. So it should be thoughtfully executed in favour of people you know and trust like your spouse, children etc…
- Special Power of Attorney: This POA vests power to the agent to act only on a specific transaction and ends with the completion of that transaction. Example, a Power of Attorney for property purchase in Delhi cancels automatically after the transaction. Since power here is limited, there’s less chance of misusing the POA, making it safer than the general POA.
To summarize,
We can say that POA is a good estate planning tool that gives flexibility to the principal to appoint another person to act on his behalf. It is not permanent and can be revoked any time. However, it should be given only to a person you trust.
Learn stocks trading course, derivatives and trading strategies from sharekhan Education’s online Mastering futures and options trading course.
