4 Mistakes You Don’t Want to Make in Your Power of Attorney for Finances
4 Mistakes You Don’t Want to Make in Your Power of Attorney for Finances
A power of attorney allows another person (e.g., your spouse or adult child) to manage your financial affairs in the event that you become mentally incapacited. Otherwise, without a power of attorney, you and your family would need to go through the public court process of appointing a conservator. To make sure you and your family don’t have to deal with that unnecessary process, you’ll want to have a power of attorney that clearly outlines what a person can (and cannot) do.
When drafting your power of attorney, be sure to avoid these 4 common mistakes:
Forgetting to make the document “durable.” It may seem like a no-brainer that your power of attorney should continue to function after you have been deemed “mentally incapacitated”, but if you fail to specify that in your document then the bank (or whatever other third-party is relying upon the legal authority of your document) will not be able to let your attorney-in-fact or agent act on your behalf. Since the whole point of the document is to have a person act on your behalf for financial matters when you are mentally incapacitated, you should clearly state that the power of attorney is “durable” and remains in effect regardless of your mental competency..
The document is too limited. It’s understandable that you may be hesitant in deciding what powers to grant another person, especially when it comes to your finances, but you should only be naming a person you trust completely to be your power of attorney. Therefore, when it comes to listing powers, it is common to list virtually everything you can do yourself (minus a few key powers) to ensure your agent can properly act on your behalf in a variety of situations. With that being said, there are a few powers that I carefully draft around to balance the needs of my clients with the practical application of a power of attorney so make sure to speak with your estate planning attorney to make sure all the most common powers are in your durable power of attorney.
The document is old. In Massachusetts you are allowed to have your power of attorney’s authority remain intact so long as you are still living, however, banks and other financial institutions are sometimes hesitant to immediately accept such authority if it's based on a document that was drafted and signed decades ago. The general rule of thumb is to have your power of attorney re-executed every 3 to 5 years depending on your situation. If there is still any doubt in your mind, it is highly recommended that you speak directly to your contact person at the bank or investment company to make sure you meet their internal policies. Once again, the whole point of the document is to avoid unnecessary delays in allowing a person to act on your behalf so you’ll want to make sure there are no hiccups if/when that time comes.
Name alternative attorney-in-fact / agent. While most married couples will name their spouse as the primary power of attorney, you shouldn’t stop there. It is a best practice to name at least one backup agent in the event that the primary agent ceases to or is unable to act on your behalf. Siblings, in-laws, adult children, or trusted friends tend to be the most common alternates in a power of attorney.
If you can avoid these common mistakes, then you are one step closer to the peace of mind that you are looking for. If you have any additional questions or concerns about powers of attorney or estate planning in general, then please feel free to contact me at any time for your free personal consultation.
All the best,
Joseph M. Lento, JD
Estate Planning Attorney
Perennial Estate Planning
477 Main St, Stoneham, MA 02180
Phone: (781) 202-6368
Email: JLento@PerennialTrust.com
Wills & Trust to protect your family’s future and give you peace of mind.
