What You Need to Know About Powers of Attorney

If you are asked to serve as someone’s power of attorney, you’ll need to understand what they are asking you to undertake. If you are asking someone to be your power of attorney, you should know what it is you are asking them to do. Don’t be surprised if someone is reluctant; it’s a big responsibility.

A person acting as agent under a power of attorney plays a significant role in helping a principal avoid incapacity issues, and that agent acts as the principals fiduciary to make decisions on their behalf when they are unable to do so for themselves.  A recent article from the Lubbock Avalanche-Journal, “Five common myths about powers of attorney” addresses some misconceptions.

1. There’s just one uniform power of attorney document. No, there are many types. However, they can vary by state. Talk to an experienced estate planning attorney to draft a document to meet your specific needs.
2. It’s OK to sign a power of attorney, even if I lack mental capacity. No, to be valid, the person granting the rights (the principal) must have mental capacity to execute the document. A power of attorney can be valid for an individual with mental incapacity, provided the document was signed before the occurrence. That’s a key reason to have a durable power of attorney in place.
3. A durable power of attorney and healthcare power of attorney are the same thing. No, a durable power of attorney grants rights to an agent to act on your behalf, regarding your assets or other personal contracts. These rights can be general to all assets for an unlimited time, or the POA can be limited as to the time frame and assets included. A medical power of attorney grants an agent the authority to make medical decisions on your behalf.
4. Senior citizens are the ones who need a power of attorney.   Because accidents and unforeseen illness can strike at any age, all individuals should have a power of attorney. You need to have a plan in place to ease the burden of one aspect of an already stressful and complicated situation. Don’t assume your spouse has automatic power to make decisions on your behalf.  Unless you have given your spouse the authority to act as your agent under a power of attorney, many otherwise simple issues can become unnecessarily complicated.
5. A power of attorney can be used to handle my relative’s estate at death. Again, not true. Although there are other ways to structure an estate to avoid probate, a power of attorney isn’t one of them. A power of attorney lets the agent to stand in the place of the principal to make decisions. It doesn’t continue beyond the death of the principal.  Once the principle dies, their last will and testament governs the administration and access to their assets.

A power of attorney can be an important tool in your estate plan. However, it has to be used correctly, and the right person has to be selected to handle the tasks. Talk with your estate planning attorney about your selection; they will have insights that will make the selection process easier.

Reference: Lubbock Avalanche-Journal (March 15, 2019) “Five common myths about powers of attorney”