A power of attorney (POA) is a legal designation of which allows someone (as an attorney-in-fact/agent) to act for and on behalf of another person (the principal). Upon signing with witnesses and a proper notary (in most states), a legal power of attorney document is created. The power can vary from narrow to broad, temporary to permanent, effective immediately, or for the future – regardless, there’s a lot to consider before signing a POA.
Review the following before executing a POA
Three Key Advantages:
- Arguably, the biggest advantage of a POA is the convenience factor. A POA acts on your behalf to handle affairs without your presence.
- A POA can help you when you no longer have the capacity to tend to your own matters – while physical incapacity does not qualify (i.e., being bed-ridden), mental limitations such as dementia do. Proper preparation, in this sense, prior to unfortunate turns in health, can alleviate stress on families and friends.
- The flexibility of a POA, both in means of the power and the timeframe, make it a great option for some. It’s important to do your due diligence in your specific situation.
Three Key Disadvantages:
- One major downfall of a POA is the agent may act in ways or do things that the principal had not intended.
- There is no direct oversight of the agent’s activities by anyone other than you, the principal. This can lend a hand to situations such as elder financial abuse and/or fraud. If you suspect a case of elder abuse fraud, be sure to follow these new requirements in reporting it.
- With the above-mentioned potential for abuse or fraud in mind, many third parties, such as a bank or other financial institution, may not accept a power of attorney.
- If your POA is going to have great control over finances, the agent-principal relationship should be comprised of the utmost trust.
- A child is often not the best fiduciary, as it is difficult for a child to remain completely objective.
- If you do choose to appoint an agent, be sure they follow these tips to ensure they sign correctly.
For more comprehensive information and insights, watch our Ask a Pro: Probate Recovery - How to Successfully Manage the Claim and Collection Process