However, mistakes in drafting or executing a POA can lead to confusion, legal battles, and unintended consequences. Below are common mistakes to avoid when dealing with a Power of Attorney.
1. Not Understanding the Different Types of POA
There are several types of POA, each with specific powers and limitations. The General Power of Attorney gives broad powers to the agent, while a Limited or Special Power of Attorney restricts them to particular actions.
A Durable Power of Attorney remains in effect if you become incapacitated, but a Non-Durable Power of Attorney does not. It’s crucial to understand which type is appropriate for your needs.
2. Choosing the Wrong Agent
The most common mistake is not thinking carefully about who you appoint as your agent, also known as an attorney-in-fact. You need to trust that this person will act in your best interest.
Sometimes, people automatically choose a spouse or child without considering if that person has the knowledge, time, or willingness to handle the responsibilities.
3. Not Specifying Powers Clearly
Vagueness in a POA can lead to an agent not having enough authority to make decisions or having too much freedom, which could lead to abuse. Specify what your agent can and cannot do.
4. Waiting Too Long to Create a POA
Many people wait until they are in poor health or facing surgery to create a POA. If you’re not mentally competent when the POA is created, it’s invalid. It’s best to set up a POA while you’re healthy and clear-minded.
5. Not Considering a Successor Agent
What happens if your first choice for an agent is unable or unwilling to serve when the time comes? Without naming a successor agent, your POA may become useless. It’s essential to appoint an alternate who can step in if needed.
6. Failing to Review and Update
A POA isn’t a “set it and forget it” document. Life changes such as divorce, death, or estrangement can affect your POA. Regularly review and, if necessary, update your POA to reflect your current wishes and life circumstances.
7. Not Discussing Your Wishes With Your Agent
Your agent should understand your preferences and values. Discuss your financial goals and medical wishes to ensure they make decisions that align with your views.
8. Neglecting to Address Disability or Incapacity
A Durable Power of Attorney is designed to stay in effect if you become disabled or incapacitated. If you fail to specify that you want your POA to be durable, it may not serve its primary purpose when you need it most.
9. Not Providing Guidance for Financial Decisions
While you might trust your agent’s judgment, it’s wise to leave guidelines for handling specific financial tasks or assets, especially if they require management expertise.
10. Overlooking the POA as Part of a Larger Estate Plan
A POA should work in concert with your will, trusts, and other estate planning documents. Make sure there’s no conflict between them and that they all contribute to your comprehensive estate plan.
11. Failing to Consider State Laws
POA laws vary by state. What’s permissible in one state might not be in another. Ensure your POA complies with the laws of the state where you reside.
12. Not Consulting with a Legal Professional
While DIY legal forms are available, they might not cover all bases or adhere to your state’s laws. A qualified attorney can help you avoid pitfalls and tailor a POA to your situation.
Power of Attorney: Conclusion
A well-executed Power of Attorney can provide peace of mind and ensure that your affairs are managed according to your wishes if you cannot do so yourself.
Avoiding these common mistakes will help create a solid POA that safeguards your interests and facilitates smooth financial management when needed.
Always consult with a legal professional to ensure your POA and broader estate plan meet all legal requirements and reflect your wishes accurately.
Remember, taking the time to carefully consider and craft your POA is a gift to both you and those you trust to act on your behalf.
