A durable general power of attorney (POA for short) is a document that allows you to name a family member or trusted friend to act on your behalf for business and financial matters. The person named in the document is called an “attorney-in-fact” or simply an “agent”. Even though exploitation risks exist, there are great benefits to an individual (in this context referred to as the “principal”) privately empowering another person (the attorney-in-fact or agent) to act on the principal’s behalf to perform certain financial functions. The proper use of a power of attorney document depends on the reliability and honesty of the appointed agent. Below is a discussion of some of the best perks of utilizing this tool as part of an estate and disability plan.
It provides the ability to choose who will make decisions for you (rather than a court).
If someone has signed a durable general power of attorney and later becomes incapacitated and unable to make decisions, the attorney-in-fact named in the document can step into the shoes of the incapacitated person and make important financial decisions. Without a power of attorney, a guardianship may need to be established, which can be very expensive.
You can avoid the necessity of a guardianship.
Someone who does not have a durable general power of attorney at the time they become incapacitated would have no alternative than to have someone else petition the court to appoint a guardian. The court will choose who is appointed to manage the financial and/or health affairs of the incapacitated person, and the court will continue to monitor the situation as long as the incapacitated person is alive. While not only a costly process, incapacitated person also has no input on who will be appointed to serve as guardian.
It provides family members a good opportunity to discuss wishes and desires.
There is much thought and consideration that goes into the creation of a power of attorney. One of the most important decisions is who will serve as the agent. When a parent or loved one makes the decision to sign a power of attorney, it is a good opportunity for the parent to discuss wishes and expectations with the family and, in particular, the person named as agent in the power of attorney.
It captures the principal’s intent.
Many of us have read about court battles over a person’s intent once that person has become incapacitated. A well-drafted power of attorney, along with other health care directives, can eliminate the need for family members to argue or disagree over a loved one’s wishes. Once written down, this document is excellent evidence of their intent and is difficult to dispute.
It can prevent delays in asset protection planning.
A comprehensive power of attorney should include all of the powers required to do effective asset protection planning. If the power of attorney does not include this type of power, it can hinder the agent’s ability to complete the planning and could result in thousands of dollars lost.
It can protect the agent from claims of financial abuse.
Comprehensive powers of attorney often allow the agent to make substantial gifts to self or others in order to carry out asset protection planning objectives. Without the power of attorney authorizing this, the agent (often a family member) could be accused of financial abuse.
It allows the agent to talk to important institutions.
An agent under a power of attorney is often in the position of trying to reconcile bank charges, make arrangements for health care, engage professionals for services to be provided to the principal, and much more. Without a comprehensive power of attorney giving authority to the agent, many companies will refuse to disclose any information or provide services to the incapacitated person. This can result in a great deal of frustration for the family, as well as lost time and money.
It allows an agent to perform planning and transactions to make the principal eligible for public benefits.
One could argue that transferring assets from the principal to others in order to make the principal eligible for public benefits–Medicaid and/or non-service-connected Veterans Administration benefits–is not in the best interests of the principal, but rather in the best interests of the transferees. Without a comprehensive durable power of attorney, a Judge may not be willing to authorize a guardian to protect assets for others while enhancing the protected person’s eligibility for public benefits—even if the family knows this was what the incapacitated person wanted.
It provides immediate access to critical assets.
A well-crafted power of attorney includes provisions that allow the agent to access critical assets, such as the principal’s digital assets, to continue to pay bills and access funds in a timely manner. Absent these provisions, court approval will be required before anyone can access these assets. Most older power of attorney forms do not address digital assets.
It provides peace of mind for everyone involved.
Taking the time to sign a power of attorney lessens the burden on family members who would otherwise have to go to court to get authority for before performing basic day-to-day tasks. Knowing this has been taken care of in advance is of great comfort to families and loved ones.
These points are just a few of many benefits that come with a well-written durable general power of attorney. Which benefits become the most important depends on the situation of the principal. This is why a comprehensive power of attorney is so essential: no one can predict exactly which powers will be needed in the future. The planning goal is to have a power of attorney in place that empowers a succession of trustworthy agents to do best meet the needs of the principal in the future.