Power of Attorney Procedures

by John Cromwell

    A power of attorney is a legal device that grants someone the legal authority to act on another’s behalf. A power of attorney can allow an agent to sign contracts on behalf of a principal and sell the principal’s property. Given the importance and long-term implications of such a grant, there are different procedures for creating, using and revoking a power of attorney. Powers of attorney are regulated by state law, so be sure to check the standards in your state regarding the relevant regulations.

    Creating a Power of Attorney

    A power of attorney is a written document signed by the person on whose behalf the agent will be acting. The difficulty in drafting a good power of attorney is in determining how much power to grant the agent. The agent needs enough authority to carry out the task the principal wants him to do but not so much that the agent can abuse his position. In addition to managing a principal’s assets, an agent may be able to borrow money in the principal’s name. A principal may limit an agent’s authority by prohibiting the agent from doing specific things, such as making gifts on the principal’s behalf. The principal should tell the organizations the agent will be working with about the power of attorney and the extent of the agent’s authority. You may want to consider using a licensed attorney in your area or a third- party document provider to help you prepare a power of attorney.

    Using Power of Attorney

    When doing work on behalf of a principal, an agent should bring a copy of the power of attorney as evidence of the relationship. The responsibilities of an agent generally center around being able to sign documents on a principal’s behalf. How an agent signs these documents depends on state law and other party to the contract. The agent is typically required to sign such a contract using his name followed by the phrase “as an agent through power of attorney for” and the name of the principal.

    Revoking Power of Attorney

    To revoke a power of attorney, the principal should draft and sign a document referring to the power of attorney by the date it was executed and state the agency relationship has been terminated. The document should state the principal’s name and note he is of sound mind. The principal should give a copy of the revocation to the agent and request the agent’s copy of the power of attorney back. If the agent refuses the revocation, the principal can revoke the power of attorney by mailing a copy of the revocation to the agent by certified mail. The principal should give notice of the revocation to all parties with whom the agent worked.

    Suing for Abuse of Power of Attorney

    If the agent abused his power of attorney by using it to enrich himself or defraud the principal, the principal can sue in state civil court to either undo what the agent did or seek compensation for the damages. Prior to suing, the principal should request a court order directing the agent to provide an accounting of how he spent the principal’s funds.

    About the Author

    John Cromwell specializes in financial, legal and small business issues. Cromwell holds a bachelor's and master's degree in accounting, as well as a Juris Doctor. He is currently a co-founder of two businesses.