A power of attorney (POA) document authorizes another party (the attorney-in-fact) to make certain financial, legal, and business decisions on your behalf if you are unable to do so. If you decide that you need someone to help you with these affairs, it is important to have an accurate, well-detailed POA so that nothing is left for question. We compiled a list of common mistakes we see in our practice and hopefully we provide you with some insight so that you don’t run into any complications along the way.
1) Not Making a Power of Attorney
Many people think you only need a power of attorney when you are older or hospitalized, but that isn’t true. Military personnel should create one while they are deployed, in case they become unable to handle their affairs. You may need one if you are traveling overseas, and need someone to pay your bills, especially if you are single. Consult with an attorney if you are unsure whether or not a POA is right for you.
2) Not Creating the Correct POA
There are different kinds of POA documents that are needed in certain situations. Make sure you create the right one. Do you need someone to make general financial decisions on your behalf? A General POA is probably right for you. But what if you don’t want the attorney-in-fact to have too much power? Consider a Limited POA. When will it become effective? Research Durable or Springing POA to help you make your decision. Do you need someone to handle your health care affairs? There’s one for that too.
3) No Flexibility in POA Structure
Powers of Attorney need to be drafted with as much flexibility as possible to allow for “crisis planning.” If you have to enter a nursing home unexpectedly and don’t have long-term health care or a sufficient monthly income, you will need a flexible POA so that the attorney-in-fact can handle your financial decisions. This is very important, especially because nursing home care can start at $6,300 per month. The key to a well-drafted POA is to make sure it is broad enough to avoid a guardianship if you have to qualify for government assistance to pay the nursing home bill. Otherwise, you may still need a guardianship anyway, which makes the whole process of qualifying for government benefits much more difficult.
4) Not Updating Your POA
There are a number of instances where you will need to update your POA. You will need to rewrite your POA if you move to a different state so that it complies with state laws, and if you want to change any details or give your attorney-in-fact a different set of powers. You may need to revoke your current POA and create a new one if you wish to establish a new attorney-in-fact, which happens quite often. Make sure you notify all accompanied parties of any of these changes so it will prevent possible hiccups. Companies that delegate your affairs need to be notified.
5) Giving Up Too Much Control
You must review your choice of attorney-in-fact carefully. Whomever you appoint to this position can end up with a lot of power regarding your financial and business affairs. Your Power of Attorney choice will need to be someone you trust, who can handle making tough decisions when you are unable. Make sure you give him or her the right amount of power. Don’t give someone any more information than what he or she needs to make your POA secure.
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