What does a durable power of attorney (POA) do?
You can assign your durable power of attorney to do as much or as little as you choose. People generally give extensive power over their finances and expect their agent to keep accurate records and keep their own affairs separate, to avoid conflicts of interest. Some commonly assigned powers include:
- Making critical decisions about your health care. You may want to consult an elder law attorney to create a living will, which outlines your wishes if you become terminally ill and unable to consent to or refuse medical treatment. A durable power of attorney for health care (which must be specified) has the authority to make medical treatment decisions, according to the limits you outline, when you are unable to do so.
- Handling your finances. A durable power of attorney can make bank transactions, pay your bills, attend to tax matters, fill out insurance and benefits paperwork, use your assets to cover your everyday expenses, collect Social Security, Medicare and other federally issued benefits, invest your money, file your taxes and manage your retirement accounts.
- Managing your property. A revocable living trust outlines how you'd like your property to be managed and distributed in the event of your death. Your durable power of attorney administers property not outlined in the trust only in the event of your incompetence. If you don't have a revocable living trust, you could assign this responsibility to your agent.
- Acting on your behalf with third parties. Companies you do business with, such as your electric and credit card companies will be hesitant to speak with anyone else besides you about your accounts, even if it's someone to whom you've given legal power to act on your behalf. By providing a letter of attorney, your agent will be able to communicate with these companies without any question as to their authorization.
Are there disadvantages to having a durable power of attorney?
Some parties may not recognize your durable power of attorney, especially if it's over a year old, because it's not issued by the court. Furthermore, you cannot compel anyone to honor it without taking legal action. You should re-sign the document on an annual basis to keep the record current. Another drawback is the revocation process -- revoking your power of attorney can be complicated if the agent has distributed copies to multiple third parties.
How is the durable power of attorney revoked?
- You can change your mind at any time, for any reason, as long as you are of sound mind. You'll need draft and date a statement of revocation that includes your name, a statement of your competence, the date you initially drafted the power of attorney, the name of the person you assigned as an agent, and your signature. Distribute the revocation to the initial agent and any third parties with whom the he or she has dealt.
- The court can invalidate the document if it determines you to have been incompetent when you signed it.
- If your spouse is your agent and you get divorced, the power of attorney terminates immediately. If not your durable power of attorney will terminate when you die.
What are my alternatives?
If you do not want to choose a power of attorney, a guardian or conservator may be granted by probate court. In this case, you do not have a choice as to who handles your affairs, but you can trust the court will closely monitor their actions. There is no guarantee, however, that the conservator will act according to your wishes. Another disadvantage is the potential for embarrassment -- after all, the details of your incapacitation will be exposed in a public proceeding.
Can my agent abuse the power of attorney?
The potential for fraud, unfortunately, is vast. Embezzlement and unlawful gifting are common, and sometimes, agents deplete the majority of the principal's estate, change beneficiary designations on life insurance and annuities or open bank accounts with joint titles. If you have reason to believe your attorney-in-fact has abused his or her powers, you may have grounds to sue for return of property and assets and monetary damages. If your beneficiaries discover the abuse after you've passed, they may be able to sue for a number of causes of action.Now that you know the basics, this may be a great opportunity to take action. After all why put off until tomorrow what you can take care of today?