Myths and misunderstandings about the use of Powers of Attorney abound. This very important hammer in your estate planning toolbox can save much time and aggravation if you become incapacitated.
One key concept: The person appointed in such a document to handle your finances is called your “Attorney-in-fact”. I am an attorney who prepares powers of attorney and later can guide an attorney-in-fact to do his or her job. That’s a lot of attorneys. If not properly drafted or used, there could be even more.
The Lubbock Avalanche-Journal’s recent article entitled “Five common myths about powers of attorney” explains away some misconceptions about powers of attorney.
- There’s just one uniform power of attorney document. No, there are many types. They can be limited to certain transactions or time, or be a complete delivery of authority to do anything, anytime. However, they can vary by state. Talk to an experienced estate planning attorney to draft a document to meet your specific needs.
- It’s OK to sign a power of attorney, even if I lack mental capacity. No, to be valid, the person granting the rights (the principal) must have the mental capacity to execute the document. A power of attorney can be valid for an individual with mental incapacity, provided the document was signed before the occurrence. That’s a key reason to have a durable power of attorney in place.
- A durable power of attorney and healthcare power of attorney are the same thing. No, a durable power of attorney grants rights to an agent to act on your behalf, regarding your assets. These rights can be general to all assets for an unlimited time, or the POA can be limited as to the time frame and assets included. A medical power of attorney grants an agent the authority to make medical decisions on your behalf.
- Senior citizens are the ones who need powers of attorney. Not true, because accidents and unforeseen illness can strike at any age. You need to have a plan in place to ease the burden of one aspect of an already stressful and complicated situation. Don’t assume your spouse has automatic power to make decisions on your behalf. It can be much more difficult unless you have given them the power of attorney. If you have a child over 18, even they should consider signing one. Potential incapacity can strike anyone.
- Powers of attorney can be used to handle my relative’s estate at death. Again, not true. Although there are other ways to structure an estate to avoid probate, a power of attorney isn’t one of them. A power of attorney lets the agent stand in the place of the principal to make decisions. It doesn’t continue beyond the death of the principal. Many people believe that the “Durable” in the name durable power of attorney refers to it lasting after death. Durable means that it can still be used if you become disabled. The authority conveyed in a power of attorney still terminates at death.
If you avoid these Five myths about powers of attorney and related misconceptions, meet with an experienced power of attorney lawyer. You can create a very useful tool to meet your needs.
Reference: Lubbock Avalanche-Journal (March 15, 2019) “Five common myths about powers of attorney”