Whom can you trust when you cannot make decisions for yourself? Adult children, trusted friends or a legal professional could work, but the selection process must be done carefully. While not frequent, criminal cases based on misuse of a power of attorney do occur.
Making the decision of whom to name as your power of attorney (POA) is not an easy one. Yet, unexpected circumstances are, by definition, not planned so it is important to make a selection while you are well and can be clear in your thought process.
Should you have an unexpected event that prevents you from speaking for yourself and you do not have an established POA in place, the only alternative for your family to gain legal authority to act on your behalf is through a guardianship procedure. And, even if the guardianship is not contested, it can be expensive, time consuming and greatly limit the freedom to make quick and necessary decisions on your behalf. Furthermore, not all courts will grant a guardianship to family members which may result in a stranger making decisions about your medical and financial wellbeing.
Having an “agent” with Power of Attorney appointed in advance is a much better option. Yet, you want to be careful so that the Power of Attorney is not abused by those whom you assume you can trust at one point in your life and may not turn out to be at a critical time when you are not in control of the situation.
While you are well, choose wisely. Selecting an agent when you are in full control of your mind and body is key. A simple test would be to ask yourself if you would turn over your checkbook to the prospective agent without hesitation, fully trusting in his or her respect for your assets.
Do you believe that this person would act with responsibility by making sure your bills were paid and be humble enough to seek counsel when they do not fully understand what to do? Will this person record all of the transactions and be meticulously honest in doing so?
If you would hesitate to give the prospective agent your checkbook today, it is not likely you would trust him or her to run your life in the future.
Too often family “politics” get in the way of a sound decision. Being influenced by the prospect of “hurt feelings” if you do not select someone who believes he or she should have that role. This is not a good reason to select a agent. Further, any person who is not all that good at managing his or her own finances is a poor choice, as well. Personal stresses might make access to your funds too great to resist.
Choose a back-up agent. There should always be an alternative to your first choice of an agent. Should the first person you select not be able to serve for any reason, you need to make an equally astute choice of a substitute.
Inform your estate planning attorney. Once you have made your selections make sure you inform your attorney of your choices. The attorney can at should family emotions overwhelm the logic of your wishes.
Customize your Power of Attorney. Do not assume that all Powers of Attorney are the same. What may be fine for one individual may not be at all suitable for you. Everyone’s situation is different. A subject to discuss with your estate attorney are the differences between limited powers, unlimited powers, powers to gift or powers for a specific task financial powers and medical powers. If you own a business, additional considerations come into play. 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.
Do not split the same duties between two people. Not all banks or investment companies will accept two Agents. Even if they do, are you certain that the two people you select be able to work together? If not, naming two could create a financial and legal firestorm. Stick with one Agent at a time for your financial matters.
When you can split duties between two people. A Financial Power of Attorney and a Health Care Power of Attorney can be two different people. When One person is better at managing money, while another is better at understanding and managing healthcare providers a conflict will not likely arise. Naming different people for each task will allow both to participate in caring for you and draw on their unique skillsets.
If you make a mistake, you are not stuck. You always have the right to remove someone from their role as your agent. Your estate planning attorney will know how to do this properly to minimize exposure for you and any agents you appoint.