Choose Wisely When Naming an Agent with a Power of Attorney

Children may have moved away or lost touch. Old contacts may have died or become disabled. You cannot trust everyone and criminal cases based on misuse of a power of attorney do exist.

Deciding who to name as your Agent with a Power of Attorney is not an easy decision. However, it is a necessary appointment, says this article “Ways to protect yourself when appointing a power of attorney” from The Mercury. Disaster and disability strike without advance notice, so it’s important to make this decision while you are well, can think it through and include in your Estate Plan.

Avoiding Guardianship

If you don’t have a Power of Attorney (POA) in place and the unexpected occurs, the only way for your family to obtain legal authority to act on your behalf is through a guardianship procedure. Even when not contested, guardianship is expensive, time consuming and can limit personal freedom. Not every court will award guardianship to a family member, so the end result could be a stranger taking control of your decisions and property.  Guardianship should be the last resort, and can often be avoided with careful planning.

Having an Agent appointed through a power of attorney is a far better alternative, but there are seniors who are concerned about the power of a POA and how it might be abused. Here are some tips to keep you in control of your life even with a POA:

Choose Wisely When You Are Well

Choose your Agent when you are of sound mind and body. A common “test” is the checkbook test: could you, right now, hand this person your checkbook without a second thought? Do you believe this person would act responsibly, in your own best interest, follow through in paying bills, ask for help in areas they may not understand, record transactions and be scrupulously honest? If you hesitate to give them your checkbook today, you aren’t likely to trust them to run your life in the future.

Many people choose an Agent based on whether the person is the oldest child or if there would be hurt feelings if the person was named. These are not good reasons. A person who has problems managing money, for whatever reason, is not a good candidate. Their own stress might make access to your funds too great to resist.

Name an Alternate Agent

There should always be a back-up person named, if the person you name is not able to serve. The same goes for trustees and beneficiaries. Discuss these alternatives with your estate planning attorney to ensure the attorney knows the identities of the primary and secondary choices.

Have a Power of Attorney Customized

Not all Power of Attorney documents are the same, and one that is great for a friend may be a disaster for you. Limited powers, unlimited powers, powers to gift or powers only for a specific task or period of time are all options when creating a Power of Attorney. You may have a business to run or a partnership to dissolve. Gifting might be permitted to limit estate taxes, if that is your wish. Limited gifting generally means less than $20,000 a year, although your estate planning attorney can provide guidance on how to best structure gifting for you. If you own life insurance policies, you may want to permit your Agent to cash in insurance policies but not allow the agent to change the named beneficiaries.

Avoid Co-Agents

Not all banks or investment companies will accept co-agents. If they do, will the two people you select be able to work together? If not, naming two could create a financial and legal firestorm.  A better alternative is to name one Agent, but have the attorney add language that gives a second person the right to receive an annual accounting.  This can allow more than one person to be involved, and can increase the accountability of the Agent.

Delegate Authority

One person might be terrific with managing money, while another could be better at understanding and managing healthcare matters. Naming different people for each task will allow both to participate in caring for you and draw on their unique skill sets.

Contact attorney John A. Laine today to get started on a plan that will enable your chosen agents to ensure your financial assets are protected and you receive the healthcare you need if incapacitated.

Reference: The Mercury (Aug. 3, 2021) “Ways to protect yourself when appointing a power of attorney”