What is the purpose of executing a power of attorney and why do people need it? A power of attorney has been defined by the Supreme Court of Singapore as an instrument created by a person who entrusts someone to act on his behalf. It is a legal document voluntarily entered into by two parties and duly certified by a notary public, usually a lawyer. The first and second party in the power of attorney are: the principal and the agent, respectively. In the power of attorney, the principal appoints the agent to perform a task in a legal capacity in his lieu.
The power of attorney empowers the agent to act upon any legal circumstance necessary of the principal, mostly if the latter cannot conduct with others, his legal affairs in person. This scenario happens in most cases, when the principal is gone from his domicile or away on a business trip for a lengthy period; or worse, if the principal is ill. The designated agent can handle an individual’s legal and financial affairs in the event of an accident or health problem that causes the person to be unable to handle them. It is one of the simplest and cheapest ways of continuing the management of your affairs in the event of incapacity. The Power of attorney is effective only while the principal is alive, but it can specify estate planning actions to be taken if the client becomes disabled. One action among many would be to continue or begin a charitable gifting strategy.
Your power of attorney may be as broad or narrow in power as you wish. You may authorize the individual whom you select to manage your financial affairs to virtually handle all financial matters or you may be very specific about what you want the person to handle. The selection of your agent needs to be done carefully because that person may be given authority to collect, invest, and disperse money. If a professional is used, fees may be involved.
A most common use for the power of attorney is when the principal enters into a transaction such as the purchase of a real estate property. The agent, by virtue of the power of attorney, deals with the company, or owner of the property until the sale is consummated. Thus, the agent pays for and signs all the legal documents necessary (such as purchase application form, contract to sell, deed of restriction, etc.) for the business venture between the principal who is the buyer, and the property owner who is the seller. Normally, the power of attorney is revocable or can be cancelled at any time. As such, the principal has only to accomplish the revocation of the power of attorney and again, have the cancellation duly certified by a notary public. The power of attorney also becomes null and void upon the death of the principal.
- What is the purpose of executing a power of attorney?
- Why do people need it?
- Why is the selection of your agent important?