A durable power of attorney is where you give someone else the authority to transact business for you. In this relationship you are the principal and the person acting on your behalf is an agent. The attorneys with the Law Office of Bryan Fagan speak to people all the time who come into our office and ask for a general power of attorney. This would be a power of attorney that permits a person to act on your behalf to perform basic, financial functions like paying bills, filing taxes, and doing things of this nature.
Incapacitation is the number one trigger event for a durable power of attorney coming into place. You would create a power of attorney in anticipation of an accident, injury, or another significant event where you could name a person to be your agent if you are incapacitated or otherwise unable to make decisions for yourself on a range of issues. Mostly these powers of attorney documents revolve around financial and/or medical matters. You may create multiple powers of attorney documents where you can take note of medical issues in one and assign powers to your attorney/agent and then another document where you could assign financial powers to your attorney/agent.
Some people may not want this, however. We also hear about people wanting a limited power of attorney. For example, if you are going out of town for a month to handle a family matter and have a closing for your house coming up then you may want a limited power of attorney to be set up so that a trusted person in your life can attend the closing on your behalf and sign the documents even though you are not going to be there. Once the closing takes place the power of attorney would no longer be valid.
A less well-known type of durable power of attorney is known as a springing power of attorney. Imagine a situation where you name an agent who would take power once you become incapacitated. You may want to name your son to this role but do not need nor want him to fulfill that responsibility before that time comes. Before you need to use this type of power of attorney you may need to have a doctor sign an affidavit or complete a form to certify that you are incapacitated. This can be difficult which is why many people choose to have a general power of attorney that goes into effect immediately.
Questions about powers of attorney documents
Can your power of attorney clear out your bank account? Yes, in short. Having power of attorney means your agent can deal with your bank and other financial institutions. Keep in mind that the power of attorney is the duty and legally bound to act as a fiduciary. This means that the agent would be bound to do things that are in your best interests. However, this speaks to the importance of putting responsible and trustworthy people in a position of power in this regard.
Certain powers must be expressly stated in the power of attorney document. Expressly state in the power of attorney that your agent has the power to make donations on your behalf. Power to deal with buy, sell, or lease property needs to be stated within the power of attorney. As we stated earlier, a general power of attorney may be signed in addition to a health care power of attorney. This can clarify roles and powers and allows you to name two people to handle financial and/or medical matters if that is your choice.
If you appoint two or more people to act as a power of attorney that can be done but it can complicate matters to a certain extent. Keep in mind that many third parties do not want to deal with multiple people as power of attorney. It may be a good idea to have joint and separate language in your power of attorney to help third parties honor your power of attorney easier. Keep in mind that these third parties cannot be forced to deal with matters related to your power of attorney document. You would be in a position where your agent is stuck in the middle and cannot execute on business matters. This is where a guardianship proceeding may have to be initiated by your agent.
The power of attorney does not have to be recorded with the county clerk. Although some third parties may require that you have it recorded so that a certified copy can be sent out to the third party. In reality, this should not make a big difference to third parties, but many will require that you have a seal on the power of attorney to authenticate the form.
The power of attorney stops when you pass away. Let’s say that you walk into our office and talk to us about a stock account that you have at a major brokerage firm. Your son has access to this account due to his having power of attorney. You envision him using that brokerage account when you die in order so that he can pay bills and handle matters associated with your passing. What would need to happen is that your son would need to go through the probate process to get the power to handle financial matters related to your passing and matters of your estate.
Handle matters when you are capable of doing so
One piece of information that we think is invaluable to share is that it is best to take care of business related to a power of attorney while you still can. The last thing that you want to do as far as a power of attorney is the plan and plan to act and then not do anything to create the document. Before incapacitation, injury, accident, or illness occurs you should strike while the iron is hot. You have options that you can pursue and would be wise to consider what those options are and move forward with whatever decision you find to be most prudent for you and your family. There are opportunities for you to create a power of attorney on your own. However, there are obvious shortcomings to this route given that you likely are not all that well versed in the law or processes surrounding the creation of a power of attorney.
Next, you would need to consider whether hiring an experienced estate planning attorney is what is best for you and your family. True, hiring an attorney will cost money. However, hiring an attorney puts you in a better position to achieve a document that reflects your needs as far as your situation is concerned. An attorney has the experience to take your goals and put them into writing in a way that third parties will honor. The reality of the situation is that third parties are not bound to honor your power of attorney. However, having an attorney assist you in this regard can help you increase the likelihood that your power of attorney is honored by a third party like a hospital, doctor’s office, bank, or other financial institution.
Appoint people that you trust to these roles as agent(s). While you may trust this person and believe that he or she will do a good job for you, that same person may not get along well with your family members. Remember that your agent needs to do what is in your best interests at all times rather than what is their best interests or what is in the interests of spite towards that family member of yours. Character matters when it comes to this subject. Just because your potential agent is a smart person does not mean that he or she is necessarily the right person.
Power of attorney abuse
When an agent decides to go in a direction with their decision making that is not in the best interests of the principal then we can run into problems. You see this happen even in situations where a family member (like a child) is named as an agent. You should think clearly about who is most likely to not only be able to intellectually handle this subject matter but is also someone who will not abuse their power under the power of attorney document.
Agents may not keep track of money and property well at all. This is a danger when a principal like you would be potentially in this scenario names someone to that agent position to make sure he or she feels involved in your life or otherwise able to be connected to you for whatever reason. I have seen parents name their adult child as an agent even though the parent has no relationship with that child. This is done to foster a certain level of trust and level during that interim period before the power of attorney becomes relevant. However, what ends up happening much of the time is that naming the adult child as the agent does nothing to foster the parent-child relationship and can harm the parent financially a great deal in the short and long term.
Remember that a financial power of attorney is usually broad meaning that you can ask your agent to perform any number of actions on your behalf once you become incapacitated or once any condition contained in the document comes to be. This is the “springing” phenomenon that we discussed earlier in this blog post. Because the powers are typically broad as contained in the power of attorney your agent can access sensitive accounts that house much of your savings and investments. If your agent decides to sell various investments, he or she must be able to justify their having done so. Record keeping is critical in this regard. Proof of why the sale was in your best interests must be shown to avoid issues down the line.
Another example of financial impropriety which could result when an agent goes off the rails and fails to honor their obligation to their principal is when he or she decides to use the property that you own to benefit themselves or their property. An agent could see that you are unable to drive your car and think that it is a good idea for him or her to be able to sell your vehicle. This could be a defensible decision if the vehicle was sold at fair market value. What may end up happening is that the agent ends up selling your vehicle at a discount to a relative or even to themselves. This is an issue with some agents and is a good reason to make sure that you will be able to trust the person that you empower in your power of attorney document.
Another issue is if an agent takes your credit card and starts to make charges on it that are not in your interests. Spending large amounts of money on items for themselves is not out of the question if the person lacks good character traits. The person has access to your financial accounts so it would not be a stretch for that person to purchase some items for themselves when out shopping for your groceries. Of course, you may build an agreement into your power of attorney or another document that your agent can use your accounts for personal items to a certain extent if you would like. However, that is not required and should be something that your family or anyone else who is around your finances should be vigilant about watching if you are not able to do so yourself.
Sometimes children can coerce their parents into creating a power of attorney. In the legal world this is known as elder abuse. Taking advantage of an older person due to a mental, physical, or age deficit is unethical. Surrounding yourself with people that you trust can reduce the likelihood that this type of thing happens in your situation but it is wise to be alert to these types of situations. The last thing that you want to do is run into a situation where you are potentially taken advantage of by someone that you had trusted to that point.
Concerns about power of attorney abuse include how it is difficult to seek a remedy if your agent steals from you. It is difficult because you have put yourself in a position where you have signed over rights to your money to this agent. The power of attorney allows for this person to have expansive power over your finances. Therefore, moving money around your accounts can at first look to be legitimate. Secondly, if you are incapacitated it is not easy to be vigilant about your finances. If you do not have someone in your life who can keep watch over you and your financial situation then your agent could conceivably do great harm in a short amount of time.
In a case like this where your agent has been abusive and even law-breaking in their time serving in this capacity your children may have to take steps to protect you. For instance, if it comes to light that the agent named in your power of attorney document has stolen or otherwise misappropriated money from you then your children or nearest relative may need to initiate a conservatorship proceeding in a probate court. This would allow that person to become your guardian due to your incapacity. This way you could be under the watchful eye of a trusted relative. Powers contained in the power of attorney would be removed.
How can you proceed in a situation where you believe that you will need someone to assist you with your finances and health care decisions? It is a good idea for you to not put yourself in a position where you can be taken advantage of. You can do everything you can to avoid problems with your health- mental or physical. Take care of yourself, see your doctor, and eat well. These are simple remedies that are relatively inexpensive and can prevent bad outcomes down the line.
If it does become necessary for you to create a power of attorney, then you can take action with the assistance of an experienced estate planning attorney. The attorneys with the Law Office of Bryan Fagan can work with you to create a power of attorney that protects your interests. Assigning the powers that you want and naming the right person as your agent are crucial steps that you can take with an attorney by your side. Guiding you and then helping you execute your objectives is where the Law Office of Bryan Fagan excels.
Questions about the material contained in today’s blog post? Contact the Law Office of Bryan Fagan
If you have any questions about the material contained in today’s blog post, please do not hesitate to contact the Law Office of Bryan Fagan. Our licensed estate planning attorneys offer free-of-charge consultations six days a week in person, over the phone, and via video. These consultations are a great way to learn more about the world of estate planning as well as how your family may be impacted by the filing of a probate case.