Who needs a power of attorney?

A power of attorney can be helpful for anyone considering delegating management of their finances, or other matters, to someone else. You may consider this step if you’re older, a business owner, a frequent traveller, or the parent of minor children cared for by someone else, for example.

We explore why and when you may need to grant someone power of attorney over your affairs, and what to consider when you have the document drawn up.

Tip: A life insurance calculator can help you assess whether your current life insurance is adequate for your family.

When is a power of attorney useful?

This legal document allows an individual, known as the “principal”, to appoint another person, referred to as the “agent” or “attorney-in-fact”, to act on their behalf and manage their personal, financial, or legal matters.

A power of attorney will ensure the continuity of your affairs if you’re unable to manage them because of physical or mental limitations, or you cannot voice your preferences regarding medical treatment or surgery, for instance.

It’s also used frequently for purposes of financial management, says Fazloodien Abrahams, a director at Steenkamp Abrahams Incorporated.

“You can delegate authority to someone to act on your behalf if you’re unable or unavailable to pay your bills, manage your investments, or sell property,” Abrahams explains.

“An agent can also act on behalf of a company or organisation in legal and financial matters.”

Many people rely on this legal document if they plan to be away for an extended period – they grant power of attorney to someone they trust to manage their affairs in their absence.

Would a power of attorney benefit you?

It’s prudent to put a power of attorney in place if you’re in a high-risk profession, or if you take part in sports or activities that pose a risk of injury or disability, Abrahams advises.

“A power of attorney is also recommended if you’re a business owner, or have complex finances,” he says. “It will allow your agent to manage important transactions, sign documents, and make other decisions on your behalf, ensuring continuity and efficient management.”

Deciding whether a power of attorney is the right vehicle for your needs depends on your specific circumstances – and it can be tailored to your requirements, Abrahams explains.

“You can grant limited or broad powers, specify the duration of authority, and include any specific instructions or limitations. This flexibility allows you to customise the arrangement to meet your unique requirements.”

What are the alternatives?

There are several alternatives to a power of attorney, Abrahams advises. Some options include:

• A living trust (also known as an inter vivos trust), where someone creates a trust during their lifetime to manage their assets.
• Guardianship, where the court appoints someone to manage the affairs of their “ward” who can’t act independently.
• Curatorship, where the court appoints a curator to manage the affairs of someone incapacitated by age, illness, or disability.

Abrahams recommends consulting a legal professional to help you understand the alternatives and decide on an appropriate solution.

“Ultimately, you should only decide to grant a power of attorney after carefully considering your needs, preferences, and available options. A legal professional can provide valuable guidance and help you make an informed decision,” he says.

What should you consider when granting power of attorney?

Nominate an agent while you’re still able to make decisions, Abrahams advises. This is particularly important for peace of mind if you’re ageing, or face health challenges.

“Your affairs will be managed according to your wishes if you can’t manage them yourself,” he explains.

It’s crucial to select a trustworthy, dependable person as your attorney-in-fact.

“This individual should have your best interests in mind, and be capable of handling the responsibilities associated with managing your affairs,” Abrahams points out.

The laws governing powers of attorney vary by jurisdiction, so it’s essential that you understand the legal requirements and limitations in your country or area to ensure it is enforceable and effective, he emphasises.

How do you terminate a power of attorney?

You can cancel a power of attorney any time, says Abrahams.

It will also automatically terminate if you die, become insolvent and your estate is sequestrated, or become mentally impaired.

“When a power of attorney lapses, it becomes void, and the agent no longer has the legal authority to act on the principal’s behalf,” Abrahams explains.

“Should an agent act on the authority of a lapsed power of attorney, they may become personally liable for any damages suffered.”

Tip: Is debt preventing you from planning a solid financial future? Explore debt consolidation.