What it means
The document creates a relationship of trust. The donor remains the owner of the assets, but the attorney can act for them within the powers listed.
The attorney is expected to put the donor's interests first, keep proper records and avoid mixing the donor's money with their own. Powers can be wide or narrow.
A general power covers most financial matters, while a limited power covers a specific task such as selling a house when the owner is abroad. A continuing or enduring power stays in force if the donor later loses mental capacity, which is the situation for which many people set it up.
Rules differ by country and region, including who may be an attorney, how the document must be signed and witnessed, and when it takes effect. Some documents work immediately, while others only come into effect on a trigger such as a doctor's certificate.
Anyone creating one should take advice under local law. For a business, a power of attorney can allow a senior employee or adviser to sign documents, complete a property purchase or handle tax filings when the owner is unavailable.
Banks and land registries normally ask for a certified copy and may do their own checks, which can take several weeks. Organisations should keep a register of the powers they have received and when they expire.
The main risk is misuse. A dishonest attorney could move assets to themselves, so donors should choose someone they trust, consider naming more than one attorney and ask for safeguards such as regular accounts.
The power ends on the donor's death, when the executor or administrator takes over, and it can usually be revoked while the donor still has capacity.
In practice
Real-world examples.
Example
A 78-year-old landlord signs an enduring power of attorney naming his daughter. When he later develops memory problems, she collects the rent, pays the mortgage and arranges repairs on his three rental flats. She files her records every quarter so that the rest of the family can see how the money is handled.
Example
A businesswoman moving abroad for a year gives a limited power of attorney to her accountant to sell a commercial unit. The accountant signs the sale documents and the proceeds of $640,000 are paid into her bank account. The power ends automatically on the date written in the document, so the accountant cannot use it for anything else.
Example
A couple buying a house cannot both attend the closing. The husband gives his wife a power of attorney for property, and she signs the purchase papers and the mortgage on behalf of both. The solicitor keeps a certified copy of the power in the file in case the lender asks for it later.
Case study
Seen in the real world.
Marlowe Family Holdings is a fictional family company that owns several rental properties. The founder had no power of attorney in place when he suffered a stroke, and the family found that his bank would not let anyone pay the tradesmen or collect rent from his personal account.
Court approval took many months and cost thousands in legal fees, and in the meantime, a roof repair was delayed. In this illustrative case the family learned from the experience: each member signed a power of attorney, the company kept certified copies on file, and a review date was added so the documents were refreshed every few years. The family also agreed that two members would act jointly for larger decisions, such as selling a property. When the founder recovered enough to return to work, the powers made the handover simple, and no court involvement was needed.
Watch out
Common mistakes.
- Waiting until a person has lost capacity, when it is usually too late to sign a valid document.
- Granting broad powers to someone without safeguards such as record-keeping, an annual account for a trusted relative to review, or a second attorney who must co-sign major decisions.
- Assuming the document lasts after the donor's death, when authority passes to the executor or administrator.
Questions
People also ask.
What is the difference between a power of attorney for property and one for personal care?
The first covers money and assets, while the second covers health and daily living decisions, and in many places they are separate documents.
Can the donor still make decisions?
Yes, as long as they have capacity, because the power usually adds to their authority and does not remove it.
Can a power of attorney be cancelled?
Usually yes, by the donor while they have capacity, by written revocation that is communicated to the attorney and to any institutions that hold a copy. Once the donor has lost capacity, a court is normally needed to change who acts.
From the founder's library
Take it further with the book.
Build your financial confidence beyond this definition. Shihan's full-length guide, Accounting Fundamentals, takes the same plain-English approach and turns it into a complete, practical playbook for non-finance managers, business owners and students - with chapter-end quiz answers and presentation slides included.
25% off with code MMHQ25, applied at checkout. Priced in USD - checkout may show the equivalent in your local currency.
View the book and save 25%Related