Questions about Powers of Attorney are some of the most frequently asked questions and a document that causes alot of people confusion. This article should help sort out some of that confusion.
A Power of Attorney (sometimes called a General Power of Attorney or Durable Power of Attorney) is a document that names someone (your agent) to take certain financial actions on your behalf. Depending on how the document is prepared, those actions (powers) can be very broad or very narrow. The document can also have no end date or can be for a limited time.
Can My Power of Attorney Stop Me From Going to The Bank?
No! Signing a Power of Attorney does NOT take any power or authority away from you, meaning, your Power of Attorney can’t stop you from doing things, like paying your bills or withdrawing money from a bank account.
Can My Power of Attorney Make Medical Decisions for Me?
Generally, no. Although I have seen some Powers of Attorney that include medical decision making powers, that is not typically the purpose of a Power of Attorney. A Power of Attorney is a financial document. Medicaid Decision making is reserved for a Health Care Proxy, which is a separate document.
Can My Power of Attorney Distribute Assets After I Die?
No! A Power of Attorney is a lifetime document that automatically terminates when you die. Once you have died, your Power of Attorney no longer has any authority over your finances.
What Happens if The Bank Won’t Accept A Power of Attorney?
Banks can be tricky and they shouldn’t be. A properly drafted Power of Attorney should be accepted by any institution where it is presented. That being said, more and more banks are creating their own rules and regulations around Powers of Attorney. Clients are experiencing increasing difficulty with banks internal rules about Powers of Attorney, which is troubling.
If you present a Power of Attorney at a bank and are told the document is not acceptable, the first thing to do is ask to speak to a manager. I have heard many complaints from clients that are the result of new or poorly trained staff lacking an understanding of Powers of Attorney and how they work. If a Power of Attorney is still rejected, ask specific questions about why the bank is making that decision. It may be a missing signature, improper notarization or other mistake in the way the document was created. Knowing what the real issue is will help resolve the problem quickly and efficiently.
Do I Need to Name My Spouse As My Power of Attorney?
No! You are free to name any trusted person as your agent in a Power of Attorney. There is no rule requiring that you name your spouse. In fact, as clients age, many of them choose to change their first named Power of Attorney to a child or friend to insure that the agent named is able to act should the need arise.
Does My Power of Attorney and My Health Care Proxy Need to Be The Same Person?
Absolutely not. In fact, many clients name different people for these jobs because of temperament or skill set. A child that is great with finances may not be the best medical decision maker under pressure. Likewise, if you have a child with a medical background, that child might be the best choice for medical decisions but may not be the optimal option for financial tasks.
What is a Durable Power of Attorney?
The easiest answer is that a Durable Power of Attorney and a Power of Attorney are basically the same thing. What makes a Power of Attorney durable can be that it has no expiration date, continuing once you are incapacitated. But, unless you are using a Power of Attorney for a specific purpose (like a real estate closing), it makes the most sense to create a Power of Attorney that is lasting, continues into incapacity and offers broad powers so that you have the help you need when unexpected circumstances arise.
What is a Springing Power of Attorney?
A Springing Power of Attorney is a Power of Attorney that does not become valid or effective until a specific condition arises, for example, incapacity. While there may be circumstances where this is advisable, this is not a Power of Attorney I generally recommend. Because the document is not valid until a certain condition is proven, such as two doctors stating incapacity, it leaves you open to more questions from banks and financial institutions and also risks the exposure of your personal information to those institutions.
Can I Draft My Own Power of Attorney Without a Lawyer?
Yes, but I wouldn’t advise it. There are many online platforms that offer people the chance to create their own documents, including Powers of Attorney. Some even claim to offer attorney assistance with drafting documents. Unfortunately, you may not know your document is defective until your agent tries to use it and it fails due to a drafting mistake or because you didn’t understand what powers to provide to your agent. In other words, just like a will or a trust, you don’t know it’s invalid until it’s too late.
Understanding what powers to include and why to include those powers, who to choose as your agent, when to limit your document and when to expand your document are vital to creating a Power of Attorney that truly protects you and your family when it’s most needed – in a crisis or an emergency. Investing in the advice of an experienced attorney, who knows the right questions to ask and the best suggestions for your circumstances is well worthwhile when you consider the consequences of an improperly drafted Power of Attorney.
What If I Don’t Have a Power of Attorney?
Maybe nothing. The time may never arise when you need someone else to manage your finances for you and your Power of Attorney is never used. However, the consequences of not having a Power of Attorney can be great if the need for one arises. In the most serious cases, your loved ones may need to go to court and ask for guardianship over you to make the medical and financial decisions to provide for your care should you become incapacitated.
How Do I Protect Myself From Power of Attorney Fraud or Misuse?
I advise my clients to be cautious with the actual signed document. If your agent doesn’t have a copy of the document, your agent can’t act. When I have clients who are worried about how their agent might use their Power of Attorney I advise them to keep it in a safe place and let a trusted advisor or friend know where it is and only disclose that information should the need for its use arise. Most of my clients name their spouse as their first agent and those same clients often name a child or children as the successor agent, which makes them comfortable that their finances are in safe hands. Unfortunately, this isn’t always the case. Some clients don’t have a trusted family member to name as a Power of Attorney and they are worried about its misuse. Those clients may ask an attorney or financial advisor to hold the document until the need for its use arises.
Should My Power of Attorney Be Updated?
Although your Power of Attorney may not have an expiration date, things change. From time to time it is worthwhile to talk with your estate planning attorney about changes in your life which may impact your planning documents, including your Power of Attorney. Going back to my comments above about bank rules, it is also a good idea to periodically update your documents so they are “fresh” just in case a bank or financial institution creates a rule about the age of your documents.
A Power of Attorney should also be updated when an agent dies or becomes incapacitated, when you move to a different state or when you are going through a divorce.
When is The Best Time to Create A Power of Attorney?
Every adult could benefit from having a Power of Attorney and a Health Care Proxy regardless of their marital status, the size of their estate or their living situation. I recommend that parents encourage their children to create these documents before leaving home for college. Parents often don’t realize that once a child is 18 years old, access to things like emergency medical decisions or the ability to assist with financial aid, etc. become limited. Having emergency documents in place can make life run much more smoothly in times of stress.
How Do I Create a Power of Attorney?
The best way to create a Power of Attorney is by contacting an estate planning attorney who can help guide you through the decision making process and ensure that your documents are fully and correctly drafted.
Call Cara Law today to talk about what documents you might need to have in place to help you and your family through an emergency situation.
