As previously discussed, estate plans can include more than just a will. For this reason, everyone should understand the role powers of attorney can play, as they can be a crucial document to include in the estate planning process. While a power of attorney is a document full of potential that could protect the future health and financial needs of an individual, it is also a document that could have various pitfalls if not properly drafted and executed.
A power of attorney is generally an inexpensive legal document that gives a designated individual, who is named in the document, the right to act on another's behalf when making financial and health decisions for them. Typically, adult children are named in these documents, providing them with the power to act on behalf of their aging parent who is no longer capable of making decisions on their own. Unfortunately, financial institutions do not always make it easy to exercise the power presented in these legal documents.
Powers of attorney can come in a variety of forms. The most basic forms cover specific situations, such as giving an adult child the authority to act on one's behalf during the sale of a family home. Nonetheless, a broader document is often sought. A durable power of attorney allows the designated individual to take over another's finances at any point. This essentially gives them the ability to help in the event that a person is no longer able to manage on their own.
Unfortunately, a power of attorney isn't always used as it should be, causing some to abuse the power they were granted in the document. This frequently occurs when adult children seek to enrich themselves or when a criminals forge these documents to steal from the elderly.
A way to add protection to a power of attorney is by making it a springing power. This generally means that that an adult child will not be given the authority to act on behalf of their parent until that parent is deemed incapacitated. This frequently requires a physician's statement certifying that the parent is in fact incapacitated.
While it is difficult to think ahead and plan for your future with the possibility of incapacitation, it is an important step to take. Individuals seeking to draft a power of attorney or amend a current one should understand the role of the document and how best to create it to fit their needs and desires.
Source: The Wall Street Journal, "When the Power of Attorney Lacks Power," Anne Tergesen, June 12, 2016