Powers of Attorney

Making one

Creating a Power of Attorney

Methods of Creating a Power of Attorney

· 8 min read

Creating A Power of Attorney

  • This page examines the creation of a Power of Attorney.

Terms Like “Create” Or “Make” A Power Of Attorney Have Various Meanings

Expressions like “create a Power of Attorney” or “make a Power of Attorney" may have different meanings, depending upon their context.

The expression may refer to bringing into existence a Power of Attorney that:-
..has not been signed by the principal, perhaps to be subject of further deliberation, advice or discarded is not yet signed
..has been properly executed by the principal and in respect of which no agent has accepted appointment, albeit they may accept appointment in the future. is signed by the principal
..has been properly executed by the principal and in respect of which an agent has accepted appointment to act as an agent under the Power of Attorney is signed by the principal & agent

Anyone With Capacity Is At Liberty To Create & Use A Power Of Attorney

Requisite Capacity

To create a Power of Attorney, the principal must understand their own affairs and the effect of their actions in creating a Power of Attorney.1

For example, in California:-

  • the expression "capacity to contract" is seen in §4120 and §4155:

    • §4120 provides: "a natural person having the capacity to contract may execute a Power of Attorney"
    • §4155 provides: "the authority of an agent under a nondurable Power of Attorney is terminated by the incapacity of the principal to contract":

  • §811 discusses the notion of "capacity to contract" at length

No Need To Demonstrate A Need To Use A Power of Attorney

It is not a condition of using a Power of Attorney that the principal is unable to be physically present.

A Power of Attorney may be used simply because it is convenient, in circumstances where the principal would merely prefer someone else perform a task on their behalf, despite the principal being otherwise able to perform the task themselves, if they chose to do so.

That is not to say that Powers of Attorney are not sometimes designed to work such that an agent may only perform certain tasks if the principal lacks capacity or the principal is not in a particular location or similar, however these Powers of Attorney are merely possible designs.

What an agent is authorized to do and when is always simply a matter for the principal.

Minors, Bankrupts, Prisoners, Military Personnel etc.

Subject to some state-based exceptions, a minor who has otherwise come of age for legal purposes by virtue of marriage or otherwise may create a Power of Attorney, as might a prisoner.

A bankrupt may be able to create a Power of Attorney, albeit perhaps only for certain purposes.

A military person can create a military Power of Attorney that is fully compliant with all state-based requirements, including any mandatory requirements, without being in writing if necessary, by virtue of special legislation.

Creation of a Power of Attorney by a commercial entity (i.e. a business trading as a company or partnership, a trust or an association etc.) is addressed under the heading Creation Of A Power of Attorney By A Commercial Entity Involves Special Considerations.

A Power of Attorney May Be Subject To Escrow Arrangements

A principal may create and sign a Power of Attorney that is intended to be used immediately.

Alternatively, a principal may prefer to:-

  • create, sign and place a Power of Attorney in safe custody, to be presented to an agent who may accept appointment upon being presented with the Power of Attorney
  • create, sign and have an agent accept appointment under the Power of Attorney and then place it in safe custody, only for use in certain circumstances

The potential placement of Powers of Attorney in safe custody for use in the future is an interesting feature of Powers of Attorney.

Lapse of time provisions in each of the Six (6) Greater States affirm that delay between a principal signing and an agent signing a Power of Attorney does not affect its operation, other than Texas in respect of a non-durable Power of Attorney.2

A prudent principal who does not want a properly executed Power of Attorney to remain on foot would ensure that it contains clear terms dealing with termination, absent which an agent may potentially rely upon a Power of Attorney.

Using A Power of Attorney May Be Subject To Other Arrangements

Directions and limitations included in a Power of Attorney may deal with its use.

For example, a principal might specify that a Power of Attorney:-

  • not be used unless an agent has accepted appointment before a certain date
  • terminate in certain circumstances
  • only be used if a third party has approved the use of the Power of Attorney
  • only be used if notice has been given of intention to use the Power of Attorney

There Are Various Methods To Create A Power Of Attorney

Powers of Attorney are most commonly created in writing as a ‘stand-alone’ document.

It is possible to create a Power of Attorney by other means, such as:-

  • orally (i.e. by exchanging suitable words)
  • via written communications (i.e. correspondence evidencing the creation of a Power of Attorney)
  • within a legal instrument that has a wider purpose (for example, a loan contract, see contractual Powers of Attorney)

Rights, Entitlements, Obligations, Implications & Consequences

Creating a Power of Attorney triggers rights, entitlements and obligations arising on the part of the principal, agents and third parties.

The rights, entitlements and obligations arising on the part of the principal, agents and third parties remain subject to the terms of the Power of Attorney read in conjunction with relevant laws.

For example:

  • An agent may rely on the Power of Attorney as evidence of authority to perform the tasks identified in the Power of Attorney, as and when prescribed in the Power of Attorney.
  • An agent is authorized to legally bind the principal in dealings entered into by the agent on behalf of the principal with a third party.
  • An agent becomes duty bound to act in the best interests of the principal at all times.
  • An agent is prevented from benefiting themselves at the expense of the principal, unless expressly authorized to receive the benefit.
  • An agent may acquire additional liabilities where they perform the delegated tasks improperly, fail to keep accounts, fail to avoid conflicts of interest etc.3

Creation Of A Power of Attorney By A Commercial Entity Involves Special Considerations

A commercial entity (i.e. a business trading as a company or partnership, a trust or an association etc.) must ensure that creation of a Power of Attorney is consistent with any relevant constituting documents.

The creation of a Power of Attorney by a commercial entity should be the subject of a resolution of the members as a record of the commercial entity having resolved to create the Power of Attorney, without which the validity of the Power of Attorney may be disputed.

For example, if an LLP wanted to create a Power of Attorney, it would be important to:-

  • review the partnership deed governing the partnership and ensure that it authorizes and does not impose any relevant limitation upon the entitlement of the partnership to create the Power of Attorney
  • ensure that a suitable resolution is passed by the partners, resolving to create the Power of Attorney
  • preferrably attach a copy of the proposed Power of Attorney to the resolution, to minimize any risk of debate as tpoo whether the precise terms of the Power of Attorney fall within the terms of the resolution

Similarly, if an LLC, trust, association, corporation or other commercial entity wanted to create a Power of Attorney, the starting point would usually be to review the constituting document (i.e. articles of incorporation) governing the LLC to ensure that the LLC or other kind of commercial entity is authorized to create Powers of Attorney and assuming that is the case, then attach the relevant Power of Attorney to a suitably worded resolution of directors, partners or other relevant officeholders.

In circumstances where the constituting document of a commercial entity does not expressly authorize the creation of Powers of Attorney, the constituting documents should be amended before it is created, to expressly authorize the creation of Powers of Attorney by the commercial entity.

There Are Special Considerations In Florida

In Florida, there is a prohibition upon the creation of:-

In Florida, the impact of the words “become effective” needs to be considered when creating a Power of Attorney for a person5.

It seems reasonable to equate the words “become effective” to "becoming binding upon the principal."6

  1. Click here for more information about capacity. ↩︎

  2. In a non-durable Power of Attorney under the laws of Texas, it may be prudent for example, to include a suitable direction affirming that any delay between signing of the non-durable Power of Attorney by the principal and any agent will not effect its operation, because legislation does not govern non-durable Powers of Attorney in Texas. ↩︎

  3. Ibid. ↩︎ ↩︎

  4. Being a Power of Attorney for a person that is not excluded from the ambit of the legislation - [click here] ↩︎

  5. Ibid. ↩︎

  6. Click here to read more. ↩︎