Understanding the Different Types of Power of Attorney

What are the Main Types of Power of Attorney?

Sickness and death are inevitable parts of life, and we all seem to understand the importance of preparing for possible mishaps. But not many seem to realise that we need preparation for an increasingly common disease - dementia, which prevents us from being capable of making well-informed decisions. This is when the Power of Attorney (PoA) comes into play. This article will give an overview of the different types of power of attorney commonly exercised.

What is PoA?

A power of attorney (POA) is a legal document giving one person (the agent or attorney-in-fact) the power to act for another person (the principal).

The power of attorney is frequently used in the event of a principal's illness or disability, or when the principal can't be present to sign necessary documents for financial transactions.

There are three main types of PoAs, namely General/ Ordinary Power of Attorney (General PoA), Specific Power of Attorney (Specific PoA) and Enduring/ Lasting Power of Attorney (Enduring PoA). They are applicable to different situations.

Different jurisdictions use different terminologies to refer to the different PoAs, but for the purposes of this article, terminologies that are applicable to the Hong Kong jurisdiction will be focused on. In spite of differences in the naming of powers of attorney, the nature and scope of operation are generally the same.

General PoA

General PoAs are legal documents that appoint one or more people your Attorney(s), to make decisions for you on financial matters, and to carry out everyday transactions on your behalf. It is useful for situations where you would like to temporarily assign someone else with the authority to carry out transactional activities for you. This means that you may be authorising your attorney to manage your bank accounts for you.

A General PoA is applicable to all financial affairs and transactions. In Hong Kong, it must be created in a specific form under section 7 of the Powers of Attorney Ordinance (CAP. 31) as a deed, and the Donor's signature must be witnessed by a qualified solicitor in Hong Kong. There exist time limits regarding the validity of a general power of attorney. For example, some banks do not accept a general PoA over 12 months old.

A General PoA can be created for a specified time - otherwise, it ceases when you die or if you become legally incapacitated. If you wish to have someone who can act for you if you become legally incapacitated, you must make an enduring PoA.

If you have any questions about how to create a valid General PoA, you can access our General PoA template. 

Specific PoA

On the other hand, if you would like to limit your agent's power to specific affairs only, you have the option of registering a specific PoA.

Specific PoAs are legal documents appointing one or more persons to perform certain tasks related to specified assets such as real estate properties, shares and securities. The purpose of creating a Specific PoA is usually to ensure that if something happens to you, your property will still remain intact by giving limited power to a designated agent.

For instance, if you own a house worth HK$10 million, then you could apply for a Specific PoA so that your spouse has the right to sell the house without having to seek permission from you first.

In Hong Kong, there exist two forms of Specific PoA: Deed Form and Declaration Form.

Enduring / Durable / Lasting / Continuing PoA

An Enduring PoA, also known as EPA, gives the attorney(s) durable power - which means that they can exercise their authority after the principal has become mentally incapacitated, which is contrary to other types of power of attorney dissipates once the principal becomes a mentally incapacitated person. However, do note that a principal can only assign to another person enduring PoA when he/ she is still mentally sound. You can cancel your enduring power of attorney anytime, as long as you still have legal capacity.

An EPA is known by different names in different jurisdictions, but the concept is largely the same:

In Hong Kong, the Enduring Powers of Attorney (Amendment) Ordinance enacted in 2011 stipulates the relevant laws that govern the assignment and use of Enduring PoA. The enactment gives effect to the LRC’s recommendation to adopt a new statutory form and associated explanatory information drafted in plain language and in a more user-friendly format in the hopes of boosting the take-up rate of Enduring PoA in the city.

In light of a growing elderly population and an increasing number of cases of dementia in Hong Kong, the Enduring PoA is a legal tool of special significance, and it would be wise for you to start contemplating the designation of Enduring PoA when you still have a sound mind.

For reference, you can also use our Enduring Power of Attorney template available here.

Conclusion

To sum up, the main types of power of attorney are general power of attorney, specific power of attorney and the enduring power of attorney. Although different jurisdictions may adopt different terminologies when referring to these legal tools, the functions and nature of each generally remain the same across most jurisdictions.

Assigning trustworthy, dependable agents with appropriate power of attorney according to your needs would be immensely helpful when you may not be physically present to sign certain important documents or when mishaps happen, and your mental capacity prevents you from making well-informed decisions about your property/ financial matters. It is especially important for the elderly to pay attention to the enduring power of attorney, which may come into play when their mental soundness starts to deteriorate.

Please note that this is a general summary of the position under common law and does not constitute legal advice. As the laws of each jurisdiction may be different, you may wish to consult your lawyer.