A Power of Attorney is a document authorizing
one person to act for another. In real estate transactions,
a Power of Attorney is often used when one of the parties
is out of town and wants someone else to sign the closing
documents on his behalf.
The Power of Attorney is a very useful device. However, it
can also be a very dangerous device because it can empower
one person to deal with another person's assets in ways he
may not agree with, or even to enrich himself at the other
person's expense by self-dealing. There are also some tricky
rules that govern the validity of a Power of Attorney. Before
you give someone your Power of Attorney, and before you agree
to act on behalf of someone else pursuant to a Power of Attorney,
there are a few things you should know.
A Power of Attorney involves two parties: the person who signs
it (the principal), and the person to whom it is given (the
attorney-in-fact, or agent).
Powers of Attorney can be general or special. A General Power
of Attorney gives the agent the power to act on the principal's
behalf without limitation; in other words, the agent can do
anything on behalf of the principal that the principal has
the power to do for himself. A Special Power of Attorney,
on the other hand, gives the agent the power to do only the
things specified in the Power; for example, to buy or sell
a specific parcel of property at a specified price. Obviously,
you should be very careful about giving anyone a General Power
of Attorney. In most cases, a Special Power will get the job
done with much less risk.
Generally, a Power of Attorney continues in effect until (a)
it is revoked, (b) it expires by its terms, or (c) the principal
dies or becomes legally incapacitated or incompetent at which
time it is automatically revoked. Even if it is revoked, it
continues to be effective as to third parties who do not know
it has been revoked. Therefore, it is usually a good idea
to put an expiration date in the Power so that it does not
continue for years if you should happen to forget to revoke
There is a particular kind of Power designed to survive the
disability of the principal, known as a Durable Power of Attorney.
This is useful if the principal wants the agent to have the
power to act on his behalf if the principal should become
Many states have special statutes governing Powers of Attorney,
so it can be risky to use a standard form or to copy one from
someone else. Some states require a Power of Attorney to be
signed by a witness and some states require a Power of Attorney
to be notarized by a notary public. Sometimes the Power must
contain certain specified language to be enforceable.
How to Sign
A constant source of confusion arises from the way a document
should be signed by an attorney-in-fact. Here is the way an
attorney-in-fact ("Al Agent") should sign for his
principal ("Peter Principal"):
Peter Principal, by Al Agent as his attorney-in-fact
A Power of Attorney is a useful but potentially dangerous
instrument. Be very careful when granting a Power or agreeing
to accept one from someone else.
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