Can I Create a Power of Attorney without Giving Up Control?
What is a power of attorney? A Power of Attorney, also called a POA, is a document where one person (the principal) appoints another person (the attorney-in-fact, also known as the agent or mandatary, depending on your state) to act on their behalf with respect to certain matters like finance, real estate, business, and more.
Seniors often hesitate to sign off on a power of attorney that allows someone else to act on their behalf, because they fear loss of control and exploitation. You do not have to lose control when giving power of attorney to someone! Disability can strike suddenly and appointing an agent to act on your behalf during these times can be a big help. BUT there are some guidelines to make sure you maintain the control you need when assigning this task.
1. Choose your agent well. The best way to prevent financial exploitation by an agent under power of attorney is to choose your agent well. You can use this rule as a first check on the person you are considering as your agent: Would you feel confident passing your checkbook across the table to the person you are appointing? Would he or she would act responsibly, in your best interest, ask for expert help when necessary, keep thorough records, and be scrupulously honest when it comes to handling your funds and assets?
You should not choose your agent based only on whether that person is your oldest child or whether there would be hurt feelings. If your agent is experiencing money problems his or herself this might not be the time to appoint them since the stress may be too great to handle your affairs and their own appropriately.
2. Have backup plans. There should almost always be at least one backup agent under power of attorney appointed. If your primary agent becomes disabled themselves, or is unable or unwilling for any other reason, someone else needs to be able to step up and act.
3. Ask questions to tailor the document to your specifications. Each power of attorney is unique. You can give unlimited power, limited power, or no power to gift and you should know why to use each and in which cases they are appropriate. Ask your estate planning attorney to guide you in this matter to ensure your documents fit your situation best.
4. Financial power of attorney and medical power of attorney can be separate documents. One child or friend might be great for health care and another perfect for finances. This can also give different people the opportunity to participate in decision making when you cannot.
If you choose two agents to work together, make sure your bank, brokerage house, financial institution, or financial advisor will accept them both and that all documentation to give them access has been completed
5. Make sure everyone is on the same page. If multiple people are involved in your long term care planning, make sure they are all aware of the others' responsibilities. Then, if crisis strikes, everyone is aware of whose job is whose and more likely to work together.
6. Fire when necessary. Remember, these are your documents. You should carefully reassess who has access to your information (debit cards, credit cards, user names, passwords, etc.) If your relationship with a person previously designated has changed, ask your estate planning attorney to help you reevaluate and rewrite your documents to better suit future needs.
Frequently asked questions:
What is "incapacity"?
Incapacity means a person does not have the physical and/or mental ability to manage their affairs.
Your capacity affects the creation of your Power of Attorney in that you must be mentally capable of making your own decisions at the time of creating the document for it to be valid.
Your capacity also impacts when your Power of Attorney ends. While an Ordinary Power of Attorney will cancel automatically if you become incapacitated, a Durable Power of Attorney will remain in effect even after you become incapacitated.
What is the difference between a Power of Attorney and a conservatorship?
A conservatorship, also called a guardianship, also relates to handling an incapacitated person’s affairs similar to a Durable Power of Attorney. The difference, however, is that conservators are generally authorized to act through a court order. They are usually appointed as a result of severe mental or physical incapacity and as such can also handle health care and living arrangements.
What is an “attorney-in-fact”?
The person you (as the principal) appoint is called the attorney-in-fact, agent, or mandatary, depending on your state. This person acts on your behalf, making decisions regarding your affairs.
An attorney-in-fact can be anyone you choose (a spouse, child, relative, friend, or lawyer) as long as they are:
* An adult, meaning they’ve attained the age of majority in their jurisdiction
* Not filing for or undischarged from bankruptcy
* Not the owner, operator, or employee of a nursing or extended-care facility where you’re a resident
An attorney-in-fact is not required to possess any specific qualities. However, it’s in your best interest to select someone who is trustworthy, knowledgeable, and capable of handling your affairs properly.
This person should have sufficient time, adequate financial management skills, and the ability to keep accurate financial records.
It is acceptable for your attorney-in-fact to also be your executor (the person you appoint to administer your Last Will and Testament) or a beneficiary (someone receiving a gift in your Last Will).
Does my attorney-in-fact have unlimited power?
No, an attorney-in-fact can only make decisions within the areas that the Power of Attorney addresses, such as handling a person’s business, legal, and real estate matters, finances, tax obligations, and more. Those powers can also be limited with a Specific Power of Attorney.
To appoint someone to make decisions in other areas, a different document or a court order is required.
For example, a Medical Power of Attorney is needed to appoint a decisionmaker for your medical matters, and a Health Care Directive, sometimes called a Living Will, lets you stipulate your medical care, like whether or not you would like to be put on life support, in case you are incapable of communicating your medical preferences.
Similarly, in incidents involving severe mental or physical incapacity, a court order is required to appoint a conservator to make medical decisions.
It’s also important to know that an attorney-in-fact is legally required to comply with the principal’s directions and failing to adhere to those directions, without reasonable cause, can make the attorney-in-fact liable for any damages that may result from their improper conduct.
Make sure to always contact your Elder Law Attorney before making any decisions regarding creating or changing your Powers of Attorney. These documents are imperative in planning for your future care, and must be created with care and thoughtfulness.