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Effectively Using Powers of Attorney

Effectively Using Powers of Attorney

A power of attorney (POA) document allows an individual (principal) to appoint a trusted person (attorney-in-fact) authority over critical decisions in the event of incapacitation. POAs grant the attorney-in-fact legal authority to manage any number of things, including: the principal’s assets, financial matters, tax returns, health matters, and other certain powers created by the principal.

There are two broad types:

  • Durable Power of Attorney (DPOA): Durable powers of attorney (DPOA) generally help to expedite decision-making regarding financial and health matters. Designating an DPOA gives your agent power over your assets, financial matters, tax returns, and bank accounts.
  • Healthcare Power of Attorney (HCPOA): Healthcare powers of attorney grant another individual broad rights over any medical or healthcare related decisions on your behalf.

Please find below three tips for effectively using power of attorney:

Tip #1 – Know POAs limits

A power of attorney grants specific authority to an agent over an individual’s healthcare, financial matters, or decisions about assets. These documents can help to prevent delays in medical treatment and ensure financial matters are addressed if an individual becomes incapacitated. However, they are not limitless:

  • Powers of attorney do not allow the agent to change the principal’s will. Changes to a trust can be made, but only if expressly stated in the POA.
  • Powers of attorney also cannot make decisions on behalf of the principal after their death, unless the principal has also named the agent as the executor of their will, or the principal dies without a will and the agent then petitions to become administrator of their estate.
  • Change or transfer POA to someone else. An agent has the right to decline their appointment at any time. However, unless the principal named a co-agent or alternate agent in the same POA document, or is still competent to appoint someone else to act on their behalf, an agent cannot choose who takes over their duties

Tip #2 –  Keep Your POA Up To Date

Just like all items on one’s estate plan, POAs should be kept up-to-date:

  • Since your power of attorney will potentially will be handling your health or financial affairs, you’ll want to choose someone you trust. Don’t forget that you’re giving your agent the opportunity to access either your bank accounts and other financial assets, or your medical records, at a time when you may be incapacitated.
  • On occasion, an individual might complete a new POA, designating a different person as their agent. The proper way to execute a new POA is to formally revoke all pre-existing POAs. Failing to do so creates a dilemma of multiple active POAs, and risks ineffective management of the incapacitated individual’s assets and care.
  • Keep up with changing laws. POAs created after January 1st, 2018 are automatically considered “durable.” This means, that they will stay in effect should you become incapacitated. Additionally, recording, filing, and registering your POA is no longer required, except if used for real estate transaction.

Tip #3 – If Third Parties Won’t Accept Your POA

In some cases, third parties may choose not to accept a power of attorney set in place.

  • In the event multiple POAs are active and the individual has become incapacitated, the agents named in the various POAs all have the authority provided in the documents. This could provide confusion and lead third parties not to accept your POA. This is why it’s important to formally revoke past POAs.
  • However, third parties who unreasonably refuse to accept a POA can be ordered by court to accept it, and pay attorneys’ fees.
  • To avoid third party inacceptable of POAs altogether, using a trust is a more effective way to manage assets in event of incapacity. Trust Protectors can be established to help to prevent mismanagement of trusts and preserve the beneficiaries’ best interests without requiring court intervention.

Final Advice for Effectively Using Powers of Attorney

Please remember to consult with an estate planning attorney before appointing someone as your POA. Template POA forms might not satisfy the principal’s needs, and may be called into question by third parties. An attorney’s review can help to identify inconsistencies and provide clear descriptions of the attorney-in-fact’s authority.

Give us a call today if you have any questions about effectively using powers of attorney.

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