Five Things to Consider Before Executing a Power of Attorney

A Power of Attorney agreement is one of the most powerful contracts recognized by American law. It is a written conveyance of one person’s legal authority – the “principal” – to another – the “agent.” While these agreements can be standard for medical procedures and common lifetime planning practices, a Power of Attorney can cause immeasurable damage if executed improperly.

Power of Attorney agreements can convey vast amounts of legal authority, and they can raise a great deal of legal and financial risk. As a result, anyone considering executing a Power of Attorney should contact a licensed estate planning attorney in their area. However, here are a few things to keep in mind if conveying Power of Attorney ever becomes an issue.

  1. Understand Your Rights – Power of Attorney arrangements can be a critical part of your overall estate plan. These common agreements give third parties the power to make important legal decisions on your behalf. Often, Power of Attorney is limited to a particular time period, event, or activity. For example, homeowners sometimes convey limited power of attorney to real estate attorneys or brokers when they are closing on the purchase and sale of their homes. However, it’s critical to understand how a particular Power of Attorney agreement affects your rights.A Power of Attorney can be granted on a temporary, continuous, or permanent basis. Often, revoking Power of Attorney requires a separate legal process that can be costly and difficult. However, not including a Power of Attorney document or similar legal arrangement in your estate plan can put your loved ones at risk.
  2. Properly Assess the Risks – Power of Attorney arrangements are often formalized through standard boilerplate agreements. Patients are often required to assign a Power of Attorney when going under anaesthetizia, and members of the military sometimes executed these agreements to allow family members to carry out business on their behalf when they themselves are overseas. As common as they may be, however, nobody should ever execute a Power of Attorney without adequately balancing the risks.The authority granted by a Power of Attorney agreement can be broad or narrow; the can vest upon the occurrence of some triggering event – such as mental incapacitation or physical disability – or upon signing. They can remain in force permanently, or they can end at a particular time. And because the scope of a Power of Attorney agreement can encompass the right to make nearly any legal decision about a person’s finances, medical care, or property, executing this type of agreement carries with it huge potential legal and financial liability. However, the risk associated with a Power of Attorney agreement cuts both ways.If your lifetime planning does not include a Power of Attorney that effectively distributes your property to your spouse, your family, or your partner and allows them to pay bills and handle assets in your name in the event you become capacitated, your loved ones may face unnecessary legal and financial challenges during an already difficult time. Lengthy delays caused by the absence of required documentation for insurance and banking commitments can add to the emotional and financial burden that comes with the incapacitation of a family member, and anyone planning an estate must discuss these risks with an attorney.
  3. Get it in Writing – Most contracts are perfectly enforceable even if they aren’t evidenced in writing. However, a written document provides evidence of the signatories’ intentions at the time they executed the document, which has important implications if the parties ever end up in court. If the agent named in a Power of Attorney agreement ends up making questionable decisions on the principals’ behalf, a written agreement may be the only evidence a reviewing court may have of the parties’ original intent.Only a select few types of agreements must be in writing to hold up in court, and some states do require a Power of Attorney agreement to be supported by a written contract in order to be valid. Power of Attorney in Illinois requires a written agreement, but no matter what your jurisdiction it’s critical to get all of the details of a Power of Attorney agreement in writing before signing any of your rights away.
  4. Clearly Define Limitations – Elder abuse is a sad fact in American society. More than one out of every ten elderly persons living in the United States have reported some form of abuse, and financial exploitation by family members is by far the most common complaint. This type of financial abuse costs older Americans nearly $3 billion each year, and it’s often perpetrated by means of a poorly-executed Power of Attorney.An improperly broad Power of Attorney can bring disaster to your legal and financial affairs, but a good estate planning attorney can include important terms and limitations that can help prevent fraud and abuse. For example, many estate planning attorneys recommend that clients prohibit the agent named in their Power of Attorney agreements from giving gifts. This helps prevent fraudulent conveyances of an incapacitated person’s property. Likewise, many attorneys encourage the inclusion of terms limiting changes to beneficiaries designated in the estate. This protects the clients’ survivors from improper changes in bank accounts, designations under wills or trusts, benefits awarded under life insurance policies, or other important legal matters.A Power of Attorney can be a critical part of your estate plan. These agreements can be drafted to ensure that your rights are protected in the event you become disabled, incapacitated, or otherwise unable to fulfill your legal duties. However, they can also be powerful tools of exploitation wielded by formerly-trusted spouses, family members, and friends. When drafting a Power of Attorney, every detail must be right. To help make sure your estate plan includes a Power of Attorney that covers the appropriate scope of responsibilities and circumstances of incapacitation, be sure to consult with a licensed estate planning lawyer in your area. 
  5. Consult an Estate Attorney – Power of Attorney agreements may prove to be an important part of your lifetime planning. Any agreements dictating who is entitled to make decisions on your behalf if you are unavailable or incapacitated carry a great deal of legal weight, and nobody should undertake such a weighty endeavor without good legal assistance.

A licensed estate planning lawyer will help guide you though the process of custom-tailoring a Power of Attorney arrangement that suits your individual needs. Best practices regarding the establishment of a Power of Attorney require some legwork, including a careful inventory of personal assets and an accounting shared with the trusted friend, partner, or family member who will be involved in the process. A good estate planning lawyer can help make sure your rights are protected from the beginning, avoiding the costly and potentially irreversible mistakes novices often make when executing Power of Attorney documents.