A Brief Discussion About Power of Attorney - An Important Legal Document
By Don Drake, Connelly Law Offices, Ltd.
"A power of attorney is a legal document that gives another person the authority to act on your behalf," stated professional fiduciary and certified elder law Attorney RJ Connelly III. "It is an essential document to have, especially if you are unable to carry out your affairs due to incapacity or absence. The person authorized to act for you is called an agent or attorney-in-fact. Depending on your needs, the document can provide a broad or limited range of authority. It can be used for specific activities such as closing the sale of your home or be comprehensive and general in nature."
The power of attorney can be temporary or permanent, and it may take effect immediately or only after a future event, such as a mental or physical disability. This is known as a "springing" power of attorney. You can revoke the power of attorney but must provide written notice to the person named to act on your behalf.
"Your agent can perform any action that is allowed in the power of attorney document," said Attorney Connelly. "However, they usually must present the document to use their power. For example, if they are selling a car on your behalf, the motor vehicles department will typically require them to present the power of attorney before they can sign the title. Similarly, if they're buying or selling property, they will need to show the power of attorney to the title company. If they're buying or selling securities or opening or closing bank accounts, they will need to present the power of attorney to the broker or banker. However, they usually won't have to show the power of attorney when signing checks on your behalf."
Why Have a POA?
"It's not something any of us want to think about, but there's always a possibility of becoming incapacitated due to an illness or an accident. In such an event, if you don't have a power of attorney in place, a court might appoint someone to act on your behalf. This person may not necessarily be someone that you would approve of if you had the choice," said Attorney Connelly. "You should take proactive steps to create the appropriate documents to avoid this situation. By creating a power of attorney document, you can select the person who will act for you and define their authority and limitations. It is also advisable to create a revocable living trust to provide greater security against having a guardianship imposed on you in some circumstances, but that's a discussion for another blog."
"Once in place, it's advisable to periodically meet with your attorney to review the power of attorney and determine if the chosen agent still meets your needs," continued Attorney Connelly. "It is also important to check if any changes in state law may affect the power of attorney. Some powers of attorney will specify a termination date to prevent former friends or spouses from continuing to act as agents. And remember, a power of attorney automatically becomes invalid when the person dies."
Risks Involved with POAs
"Granting a power of attorney is a significant step that can come with certain risks," points out Attorney Connelly. "As stated earlier, it involves giving another person the power to make important financial or medical decisions on your behalf, which can be risky without proper oversight. Sadly, there are many ways that an agent with a power of attorney can abuse their authority." Such abuses can include:
A Forged Document - There is a chance that the document titled power of attorney, which is presented for legal purposes, could be counterfeit or deceitful in nature. This implies that the legal authority granted by the said document may be dubious or invalid.
Pressure from an Agent - Your agent may try to convince you to give them specific authority or privileges that you may not be comfortable with. This could be due to a variety of reasons, such as a lack of trust between you and the agent or the agent trying to take advantage of your situation. You must stay firm and assertive in such situations and only grant authority that you are comfortable with. Remember, you have the right to make your own decisions, and your agent should respect that.
Agent Fraud - Keep in mind that there is a possibility that your agent, who has been appointed to act on your behalf, may use your money for their personal benefit instead of using it for your benefit. This could happen if the agent is not trustworthy or if there is a conflict of interest. Therefore, choosing an agent who is reliable, honest, and has your best interests in mind while making financial decisions on your behalf is important. Additionally, keeping a close eye on how the money is being utilized and reviewing your financial statements periodically to ensure that everything is in order is recommended.
Specify Authority - Be aware that your agent, who is appointed to act on your behalf if you become incapacitated, may be able to take actions that you did not explicitly authorize them to do. This could include making gifts, changing beneficiaries on insurance policies or retirement plans, or other financial transactions. Always consider who you appoint as your agent and clearly outline what actions they are authorized to take in any legal documents or agreements.
Protecting Yourself
Taking measures to protect yourself from the possibility of Power of Attorney abuse is crucial. These can include:
Trusting Your POA - When choosing a power of attorney (POA), choose someone you trust who understands your wishes and can make decisions in case you become incapacitated. Your POA should be transparent and accountable, with regular reporting to ensure they act in your best interest. Remember, you can revoke your POA anytime.
Inform Trusted Family and Friends - It is always a good idea to inform your trusted friends, family members, and financial advisers about your power of attorney (POA) so that they can keep an eye on your affairs in case you are unable to manage them on your own. This can include situations like a medical emergency or a sudden incapacity. By sharing this information, you can ensure that your loved ones are aware of your wishes and can take appropriate actions on your behalf. It will also help avoid any confusion or disputes that may arise later. So, make sure you discuss your POA with those close to you and provide them with a copy of the document for safekeeping.
You Can Make Changes - You can change your power of attorney (POA) at any time if you feel the original agent is no longer suitable. This means you can choose a new agent or not have a POA at all. Keep your POA up to date to ensure it reflects your wishes.
Exercise Caution - Be cautious when someone offers to manage your finances and investigate their background before entrusting them with your financial or medical matters, especially if the offer seems too good to be true. Don't take unnecessary risks regarding your finances or health, even if it means turning down an offer of help.
"To safeguard against the abuse of power of attorney, several states have implemented laws that aim to protect individuals from any potential harm caused by their agents," said Attorney Connelly. "Laws that govern agent-principal relationships usually define the exact responsibilities and obligations that agents must follow when representing their principal. These laws may also require agents to maintain comprehensive records of all transactions and decisions made while acting as an agent. The purpose of these legal measures is to ensure that agents work in the best interests of their principal and avoid any potential conflicts of interest, misconduct, or unethical behaviors".
Please note that the information provided in this blog is not intended to and should not be construed as legal, financial, or medical advice. The content, materials, and information presented in this blog are solely for general informational purposes and may not be the most up-to-date information available regarding legal, financial, or medical matters. This blog may also contain links to other third-party websites that are included for the convenience of the reader or user. Please note that Connelly Law Offices, Ltd. does not necessarily recommend or endorse the contents of such third-party sites. If you have any particular legal matters, financial concerns, or medical issues, we strongly advise you to consult your attorney, professional fiduciary advisor, or medical provider.
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