By: Marshall Chriswell
A Power of Attorney is a written document that gives one person authorization to act on behalf of another. I regularly recommend that my estate planning clients sign Powers of Attorney (including a Financial Power of Attorney and a Healthcare Power of Attorney) as an integral part of their estate plan.
During my clients' free initial consultation, before drafting their Power of Attorney documents, I have a detailed conversation regarding their wishes. Although the advice I give each person is different, many clients have similar questions and misconceptions about Powers of Attorney. Here are 5 quick facts everyone should know about Powers of Attorney:
1. Powers of Attorney are "Powerful" documents.
A Power of Attorney appoints a trusted person (your agent) to make decisions on your behalf in the event that you are unable to make those decisions on your own. A Power of Attorney typically gives your agent the authorization to manage your bank accounts, make deposits and withdrawals, write checks, sell your assets (including real estate and business interests), manage investments, and other broad financial powers. A Healthcare Power of Attorney gives your agent the ability to make decisions regarding your healthcare, including what medication or other treatments you receive, where you receive treatment, whether to perform surgery, when to hire or fire doctors and nurses, as well as crucial end-of life decisions.
Having Powers of Attorney as part of your estate plan will give you great peace of mind knowing that the right person will be handling your affairs if necessary, but it is very important that you select someone who is trustworthy. Powers of Attorney are important planning documents, but in the wrong hands they can be an instrument of fraud and abuse. You should appoint an agent who you know and trust, and who shares your values.
2. Your attorney can include safeguards in your Power of Attorney to protect you from fraud.
As mentioned above, Powers of Attorney give your agent broad powers to handle your affairs. This can sometimes lead to fraud and abuse, but a good estate planning attorney can limit these risks by:
- naming joint agents,
- requiring your agent to file accounts to demonstrate that his/her actions are proper, or
- expressly limiting the agent's powers.
3. You are not too young to sign a Power of Attorney
We all know that life is unpredictable. Many of us will become ill or injured before we reach an advanced age. Sometimes that illness or injury will be temporary, and sometimes it will be long-term. A good estate planning attorney attempts to prepare for every contingency. This is why I recommend that every adult should have Powers of Attorney documents.
Imagine that you are hurt in an accident tomorrow, and are unable to handle your affairs for several months. How would you ensure that you bills were paid and other financial affairs managed while you recover? A Power of Attorney document can make these tasks much easier for your spouse or other appointed agent.
Again, imagine you are in an accident. Your doctors are performing surgery to repair a broken bone, and they discover a large tumor. If you have signed a medical power of attorney, your agent can instruct the doctors to remove the tumor and eliminate the need for future surgeries.
These situations can and do happen. You are not too young to establish a responsible estate plan.
4. Powers of Attorney can help eliminate family disputes
Advance planning will give you peace of mind. Not just because you will know for certain how your affairs will be handled, but also because it can eliminate family disputes. This is particularly true with Powers of Attorney.
Without these documents your loved ones will have to decide who gets to make decisions about your financial and medical affairs while you are incapacitated. Even if all of your family members get along well, this can be very difficult. Often, a court will have to get involved to determine awho will be your legal "guardian" to handle these matters. This proceeding can be expensive and emotionally charged. You can avoid such a situation by consulting with an attorney, and stating your wishes in a written Power of Attorney long before it is needed.
5. To sign a Power of Attorney, the signer must have mental capacity
Under Pennsylvania law, a person signing a Power of Attorney must have the capacity to understand his/her actions for the document to be valid. This is another good reason to start planning early, while you are still healthy. If you or a loved one is beginning to experience symptoms of a long-term illness (such as Alzheimer's or dementia), please see an attorney as soon as possible.
Powers of Attorney are extremely important planning documents. They can provide you with certainty and peace of mind knowing that your affairs are being handled by someone you know and trust. However, these documents can be abused, so you want to contact a competent estate planning attorney to draft them for you.