Understand the Powers you are giving to your Attorney-in-Fact (Agent), and Carefully Select the Person Who Will Serve as Your Agent
To be an effective tool in the hands of your agent, the Power of Attorney document may grant the power to buy and sell your real estate; open and close bank accounts, cash out insurance policies, and transfer assets.
This will be an "agency" relationship. Your agent will be speaking for you, with all the power that you normally have over your own business affairs.
You may be familiar with other types of agency relationships. Your insurance agent, who is a person who represents an insurance company and you, in your dealings with an insurance company.
A Power of Attorney creates an "agency relationship" that covers many, or all aspects of your life. Choose that person carefully.
Understand the reasons that you signed the Power of Attorney document.
The purpose of the Power of Attorney document is to have a trusted person designated in advance. The trusted person will be able to manage things for you, if you can't speak for yourself. This avoids the need for Probate Court to appoint a Conservator. Nobody wants to put their family through the delays and costs of Probate Court, and Power of Attorney can avoid the need for Probate.
Make sure that your agent really wants the responsibility, and is willing to do the work.
Believe it or not, there are people who decide to designate an agent, without even asking that person. If you sign a document without making sure the person named in the document knows what's going on.
The classic example is the widow who did not want to trouble her family members who lived in another state. She signed a Power of Attorney, designating her neighbor as her agent. Later, she got Alzheimer's. Her brother and niece came from out of state to help her. They found her Power of Attorney, and contacted her neighbor. He knew nothing about the document, and refused to serve. The family had to file for Guardianship and Conservatorship in Probate Court.
How old is your agent? If the person is your age, or older, is it likely they will be running into the same problems, at about the same time you do. Keeping up with bill paying and bank accounts is a challenge. Will your agent be able to manage all of the responsibility?
Carefully consider whether the agent should have the power to transfer assets to himself.
This is called a power of "self dealing." Without the power for self-dealing, your agent definitely can't transfer real estate to himself. Self dealing might be a good thing, or it might be a bad thing.
If you need nursing home care, and need Medicaid to pay for it, who will your assets be transferred to? Will the assets be spent down, or will your agent need the power to transfer to himself or to someone else?
Do you want the agent to be able to transfer assets to himself? If it's your spouse, it may not matter. If it's a distant relative, maybe you don't want him to have that power.
Consider whether your agent should account to anyone for what he's doing with your money.
If there is no requirement that he keep accounts, how can anyone know what the agent is doing with your money? If there are problems, and no requirment for regular accounting of assets, your family would have to go to Probate Court to get someone appointed who will keep good accounts.
The Power of Attorney document can be written to require that the agent account to all children, or account to all nephews and nieces, or some other class of people. There could be a requirement that he account at specific intervals, such as annually.
This is just one feature of a properly drafted Power of Attorney. You won't find all of the things you need to know about Power of Attorney in the form documents that can be downloaded from the internet. Hiring a competent elder law attorney to prepare a Power of Attorney that fits your circumstances is an investment of time and money that you and your family will value in the future.
Decide whether to nominate a Guardian and Conservator in the Power of Attorney document.
Many POA documents do nominate someone to serve as Guardian and Conservator. Often it's the same person named as the Agent!
What if that person doesn't keep accounts? Doesn't keep track of things? If anyone does step up and ask that someone competent be appointed Conservator, a serious dispute may arise. The Massachusetts Probate Code requires that the person objecting to the agent's conduct must demonstrate "Good Cause" in order to prevent the person nominated in the POA from taking over as Conservator and Guardian.
It's a trial!
Confirm that the Power of Attorney won't have unexpected tax consequences for your agent.
Serving as a Power of Attorney requires a commitment of time and energy. Confirm that there will not be unexpected estate tax consequences for your Agent.
Serving as an Agent under your Power of Attorney could have an impact on your Agent's own estate plan. Make sure that your Agent 's powers won't cause your money to be included in the value of his estate. A "Power of Appointment" over your money could cause estate tax problems for your Agent!
Finally, consider whether you really need a Trust to make sure everything is handled properly.
People with hundreds of thousands of dollars of assets;
People who have difficult family circumstances;
People who don't have close relatives or friends who want to be responsible.
These people, especially, should consider a Trust, rather than POA as their back up. A Trustee can be given specific directions, and it's easier to see when Trustees are not properly performing their duties.
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