A person's estate can be made up of a variety of assets. We commonly serve clients with accounts in financial institutions (current, investment, etc.), real estate (residential, recreational, commercial, etc.) and participation in entities (companies, for example). Managing these assets can be difficult for their owners for various reasons, such as prolonged travel or illness. Faced with these situations, there is one more tool that can be used for the prudent administration of assets: the general power of attorney.
¿What is a power of attorney?
Simply put, the power of attorney, or mandate, as our legislation calls it, is a contract in which a person “obliges themselves to provide some service or do something, on behalf of another.” It, in turn, can be express or tacit, in a public or private instrument and even verbal. In addition, it can be general or special, general being the one that “includes all the principal's business.” In other words, a mandate allows a person to act on behalf of another pursuant to the powers granted.
¿How can a general power of attorney ensure adequate estate planning?
As we mentioned previously, a person, for different reasons, may be prevented from managing their assets at any given time, or even during their life. For example, we could consider the case of a person who resides in Panama but decides to undergo medical treatment abroad. In our example, all the person's assets are located in Panama. Due to the treatment, the person will be absent from Panama for several months.
- Article 1400 of the Civil Code.
- Article 1400 of the Civil Code.
- Article 1403 of the Civil Code.
Continuing with the example, it is likely that the person will continue to have obligations in Panama, such as paying debts, maintaining real estate and even caring for dependents. It will be difficult for the person, from abroad, to issue the necessary instructions to be up to date with their responsibilities. If this person, before leaving Panama, grants a general power of attorney to a person they completely trust, they can be sure that this person, on their behalf, will be able to manage their assets and avoid further inconveniences.
¿What happens if my attorney in fact abuses the terms of the power of attorney?
As it is a private law document, the principal can grant the mandate as flexible or restricted as they wish. If the person has certain reservations about this tool, they can consider incorporating limits on amounts for which the agent can act (for example, up to US$1,000.00). The principal may even restrict the mandate over certain assets, such as a power of attorney that does not confer banking powers. Of course, in certain cases, the principal is entitled to sue the agent if they abuse the terms of the mandate granted.
¿How is a power of attorney terminated?
Any mandate can be revoked by the same person who granted it, at any time and with the same granting formalities. On the other hand, if the principal dies, the mandate expires with their death. As always, we suggest consulting with an estate planning specialist when granting a power of attorney to ensure that it complies not only with all legal formalities, but also with the client’s needs.
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