Should You Consider Granting a Power of Attorney to Others?
Hildeberto (Hil) de Frias · July 1st, 2008
Most of us have heard of powers of attorney but very few of us understand or appreciate their value.
Essentially a power of attorney is a deed that grants to another person the power to carry out acts and sign documents on your behalf as though you had carried out those acts and signed those documents yourself. The usefulness of a power of attorney should not be underestimated, nor should one ignore the potential that such power has to be abused.
In Bermuda, powers of attorney can authorise a range of activities, for example, allowing someone to do virtually anything on your behalf, or be limited in scope, such as when someone is authorised to sign a deed on your behalf (such as a conveyance of real estate) whilst you are abroad.
It is a common misperception, however, that a power of attorney is automatically valid in the event that the person granting the powers loses his or her legal capacity. In fact, without specific language written into the power of attorney ensuring its endurance throughout such a period—then called an enduring power of attorney—a standard power of attorney becomes void if the donor loses his or her legal capacity.
From an estate planning point of view, an enduring power of attorney proves its worth when the person granting the power of attorney becomes ill or of unsound mind. Whilst we all hope to remain healthy enough and of sufficient mind to handle our own affairs, it is short-sighted to think that neither of those situations could ever happen.
Examples abound of what can be undertaken with a power of attorney, such as paying your bills from your bank accounts, organising the maintenance of your real estate, entering into leases with new tenants, making decisions regarding your investments and so on.
To grant a power of attorney you must be over the age of 18 and of sound mind. If you lose your legal capacity and have not put an enduring power of attorney into effect, the only real option for your family to deal with your property and affairs is to apply to the Supreme Court to become a mental health receiver under the provisions of the Mental Health Act 1968.
Applying to the courts can be time consuming and expensive when compared to the time and cost to produce a power of attorney. Not only that, a power of attorney takes effect immediately whereas the receivership process can take weeks.
In my experience, people are generally wary of granting a power of attorney—even to spouses! Horror stories heard from others can put someone off from granting a power of attorney, even in circumstances where it would be extremely prudent to do so, such as in the case of the person who is exhibiting early signs of dementia or Alzheimer’s disease.
Whilst it is certainly true that some people abuse the powers given to them under a power of attorney, the truth is that whilst one cannot guarantee avoiding abuse of power the risk can be minimised in various ways.
For example, appoint more than one person to act so that all acts must be made jointly. This provides a check and balance for all persons appointed under the power of attorney, unless all of them collude in abusing the power, which, while not impossible, would be extremely unlikely. Another way to minimise the risk is to appoint persons who have no expectation of receiving any part of your estate, such as a trusted friend or even a professional advisor.
Still another method to minimise the risk of abuse is to limit the scope of the power of attorney. This can be done by limiting the times when it takes effect. For example you can create an enduring power of attorney to take effect only if you are so ill that you cannot deal with your own affairs or when you have lost your legal capacity and such loss has been certified by a doctor.
Despite what you may have heard about an occasional abuse of powers of attorney, you should consider granting an enduring power of attorney to trusted persons. Such foresight is only truly appreciated when there is a need but no immediate solution.
In my own experience as an attorney, I have seen families frustrated by the inability to deal with a loved one’s affairs and property where no power of attorney was granted. This experience has led me to grant to my own trusted family members an enduring power of attorney. Like most, I hope that they will never be called on to act on my behalf, but my foresight today may prevent unnecessary suffering and frustration for my family at an otherwise difficult time.