Understanding Power of Attorney: What You Need to Know

Learn what a power of attorney is, when to use it, and the types available.

A Power of Attorney (POA) is one of the most important legal documents you can create, yet it's often misunderstood. Whether you're planning for future incapacity, need someone to handle affairs while you're unavailable, or are considering accepting POA responsibilities, understanding this powerful legal tool is essential for protecting yourself and your interests in Pakistan and the UK.

What is a Power of Attorney?

A Power of Attorney is a legal document that grants one person (the "attorney" or "agent") the authority to act on behalf of another person (the "principal" or "donor") in legal, financial, or healthcare matters. It allows the attorney to make decisions and take actions as if they were the principal themselves, within the scope of authority granted.

Key Terminology

Principal/Donor: The person who creates the POA and grants authority to another.

Attorney/Agent: The person who receives authority to act on the principal's behalf. (Note: "attorney" in this context doesn't mean lawyer???it's anyone appointed under a POA).

Third Parties: Banks, government agencies, healthcare providers, and others who will rely on the POA when the attorney acts.

Types of Power of Attorney

1. General Power of Attorney

Grants broad authority to handle almost all of the principal's affairs including:

• Managing bank accounts and investments
• Buying, selling, or managing property
• Operating businesses
• Entering into contracts
• Filing tax returns
• Handling legal matters

When to Use: When you need someone to handle comprehensive affairs during your absence, such as living abroad, medical treatment overseas, or business commitments preventing personal attendance to matters.

Important Note: General POA typically ends if the principal becomes mentally incapacitated (unless it's a "durable" power of attorney).

2. Special/Limited Power of Attorney

Grants authority for specific purposes or transactions only, such as:

• Selling a particular property
• Managing a specific bank account
• Representing in a particular legal case
• Collecting a specific document or payment

When to Use: When you need assistance with particular matters but don't want to grant broad authority. Common for one-time transactions or specific ongoing needs.

3. Durable Power of Attorney

In the UK: A Lasting Power of Attorney (LPA) remains valid even if the principal loses mental capacity. Two types exist:

Property and Financial Affairs LPA: Covers financial and property decisions. Can be used while you still have capacity or only after you lose it.

Health and Welfare LPA: Covers healthcare and personal welfare decisions. Only used after you lose capacity.

In Pakistan: While durable POA isn't specifically codified, POAs can be drafted to continue during incapacity if expressly stated.

When to Use: Essential for aging individuals or those with progressive illnesses who want to ensure someone can manage their affairs if they become incapacitated.

4. Springing Power of Attorney

Becomes effective only upon occurrence of a specified event, typically the principal's incapacitation.

When to Use: When you want POA to exist only if specific circumstances arise, maintaining full control until then.

Legal Requirements for Creating a POA

In Pakistan

Capacity: Principal must be of sound mind and at least 18 years old.

Written Document: POA must be in writing. While specific formats exist, key elements include:

• Principal's full name and details
• Attorney's full name and details
• Specific powers being granted
• Duration (if limited)
• Date and place of execution

Attestation: POA must be attested by two witnesses who are present when the principal signs.

Registration (where required): POAs affecting immovable property must be registered with Sub-Registrar under Registration Act 1908. Other POAs can be registered voluntarily for added authenticity.

Stamp Duty: Appropriate stamp duty must be paid based on POA type and jurisdiction.

In the UK

For Lasting Powers of Attorney:

• Principal must be 18+ and have mental capacity
• Use prescribed forms (LP1F for property/finance, LP1H for health/welfare)
• Certificate provider must confirm principal understands POA
• Must be registered with Office of Public Guardian before use
• Registration fee ??82 per LPA (reduced/exempt for low income)

For Ordinary POAs: Less formal requirements???can be created without registration, but must be clearly written, signed, and witnessed.

Choosing the Right Attorney

Selecting your attorney is crucial. Choose someone who is:

Trustworthy: Paramount quality. Your attorney will have significant control over your affairs.

Responsible: Someone who handles their own affairs competently and makes sound decisions.

Available: Willing and able to fulfill duties when needed.

Capable: Understands financial matters (for financial POA) or can make healthcare decisions (for health POA).

Honest: Will prioritize your interests above their own.

Common choices include:

• Spouse or partner
• Adult children
• Trusted siblings or other relatives
• Close, long-term friends
• Professional attorneys (lawyers, accountants) for complex matters

Consider Appointing Multiple Attorneys: You can appoint:

• Joint Attorneys: Must make all decisions together unanimously
• Joint and Several: Can make decisions together or independently
• Replacement Attorneys: Backups if primary attorney cannot serve

Powers That Can Be Granted

Financial and Property Powers

• Access and manage bank accounts
• Pay bills and expenses
• Collect income (salary, pensions, rental income)
• Buy, sell, mortgage, or lease property
• Manage investments
• Operate businesses
• File tax returns and handle tax matters
• Make insurance claims
• Enter into contracts

Healthcare and Personal Welfare Powers (UK LPAs)

• Decide where you should live
• Consent to or refuse medical treatment
• Choose healthcare providers
• Access medical records
• Make decisions about daily care
• Decide on life-sustaining treatment (if expressly authorized)

Powers That Cannot Be Granted

Certain powers cannot legally be delegated via POA:

• Making a will on your behalf
• Voting in elections
• Consenting to marriage or divorce
• Making decisions after your death
• Personal actions (POA cannot perform personal acts like sitting exams)

Duties and Responsibilities of an Attorney

If you're appointed as an attorney, you must:

Act in Principal's Best Interests: All decisions must benefit the principal, not yourself.

Follow Instructions: Operate within the scope of authority granted. Don't exceed your powers.

Avoid Conflicts of Interest: Don't use POA for personal gain or benefit.

Keep Records: Maintain detailed records of all transactions and decisions made.

Keep Money Separate: Don't mix principal's funds with your own.

Consult When Appropriate: Involve the principal in decisions if they have capacity.

Act with Care and Skill: Exercise reasonable care and diligence in handling affairs.

Keep Information Confidential: Protect the principal's private information.

In UK, attorneys under LPAs must follow additional requirements under Mental Capacity Act 2005 principles.

Risks and Safeguards

Potential for Abuse

POA can be misused through:

• Unauthorized transactions for attorney's benefit
• Misappropriation of funds or property
• Entering into disadvantageous transactions
• Neglecting principal's interests
• Exceeding granted authority

Protective Measures

Limited Powers: Only grant powers actually needed. Use special POA for specific purposes.

Multiple Attorneys: Require joint decisions for major transactions, providing checks and balances.

Third-Party Notification: Instruct attorney to inform family members or solicitors of significant decisions.

Regular Reporting: Require attorney to provide periodic accounting of actions taken.

Time Limits: Set expiration dates or require periodic renewal.

Professional Attorneys: For substantial estates, consider appointing professional attorneys who are regulated and insured.

Registration: Register POAs where possible???provides public record and oversight.

Revoking or Changing a Power of Attorney

As principal, you can revoke POA anytime while you have mental capacity:

Revocation Process

1. Create Written Revocation: Document stating POA is revoked, signed and dated
2. Notify Attorney: Inform attorney in writing that POA is revoked
3. Notify Third Parties: Inform banks, government agencies, and others who may have relied on the POA
4. Retrieve Original POA: Get back or destroy original POA document
5. Register Revocation: If POA was registered, register the revocation

Automatic Termination

POA automatically ends when:

• Principal dies (POA ends immediately upon death)
• Principal revokes it
• Attorney dies, becomes incapacitated, or resigns
• Stated expiration date arrives
• Specific purpose is accomplished (for special POAs)
• Principal loses mental capacity (unless it's a durable/lasting POA)
• Principal and attorney marry or enter civil partnership (in some jurisdictions)

Using Power of Attorney Across Borders

If you need POA to be effective in both Pakistan and UK (or other countries):

Separate POAs: Often best to create separate POAs complying with each country's legal requirements.

Apostille/Legalization: For POAs executed in one country to be used in another, they may need apostille (for Hague Convention countries) or embassy legalization.

Translation: POAs may require certified translation to be accepted.

Legal Advice in Both Jurisdictions: Consult lawyers familiar with laws in all relevant countries.

Alternatives to Power of Attorney

Joint Accounts: Simpler for bank access but less flexible and may have inheritance tax implications.

Trusts: For complex estate planning, trusts provide more control and protection.

Court-Appointed Guardianship/Deputyship: If someone loses capacity without POA, courts can appoint guardian (Pakistan) or deputy (UK), but this is costly, time-consuming, and restrictive.

Corporate Trustees: Professional trust companies can manage assets under trust arrangements.

Common Situations Requiring Power of Attorney

• Living Abroad: Need someone to handle property sales, legal matters, or business in your home country
• Health Issues: Anticipate possible incapacity from illness or aging
• Business Operations: Travel frequently and need someone to handle business matters in your absence
• Property Transactions: Can't personally attend property sales or purchases
• Military Service: Deployed overseas and need someone to manage affairs
• Elderly Parents: Aging parents grant POA to adult children for future care needs
• Immigration Matters: Need representation for visa applications or legal proceedings while abroad

Frequently Asked Questions

Can I have more than one POA?
Yes, you can create multiple POAs for different purposes or jurisdictions.

Does attorney need to be a lawyer?
No, anyone you trust can be appointed (not just legal professionals).

Can attorney make gifts?
Only if expressly authorized. Generally limited to reasonable gifts for occasions like birthdays.

What if attorney makes mistakes?
Attorney can be held liable for negligence, breach of duty, or fraud. Third parties may also have claims.

Can businesses use POA?
Yes, companies can grant POA to authorize individuals to act on the company's behalf.

Conclusion

Power of Attorney is essential for comprehensive life planning, ensuring your affairs can be managed if you're unavailable or incapacitated. While it grants significant authority, properly drafted POAs with careful attorney selection and appropriate safeguards protect your interests while providing necessary flexibility.

Whether you need to create a POA, have been appointed as an attorney and need guidance on your duties, or suspect POA abuse, professional legal advice ensures proper handling. Our estate planning attorneys help clients in Pakistan and the UK with all aspects of Power of Attorney, from drafting and registration to enforcement and revocation. Contact us today to discuss your POA needs and protect your future.