Whom should you trust to manage your financial well-being when you are no longer able to do so? An agent under power of attorney (POA) has the legal authority to represent you and make decisions on your behalf. What characteristics should you look for when designating an agent under power of attorney? Your potential agent should be a person you think is trustworthy to conduct your affairs in your best interest.
Usually, the principal (the person who signs the POA) may choose a family member such as a spouse or adult child. If a family member is unable or unwilling to serve, you can name a trusted friend or retain professional representation to ensure your needs are met. We recommend that our clients choose a secondary agent in case their primary agent is unable to serve.
Stipulations regarding the selection of an agent under POA are minimal. Your chosen power of attorney must meet two legal thresholds: be an adult and not be incapacitated. There are no special qualifications regarding financial acumen or legal knowledge, and in fact, integrity is considered the most important attribute when selecting your agent.
Some questions to consider beyond your basic level of trust with this person(s) include:
- How does this person manage their own legal and financial responsibilities? Are they financially responsible? Do they lead a steady life? Are they good at making decisions under pressure?
- Will the person you select charge you a fee for their service? Generally, family members will not but, if you choose professional representation, such as a financial planner or an attorney, there is usually a fee associated with their expertise and service.
- Is the person you want to represent you willing to do so? Becoming an agent is a big responsibility to accept, and for many reasons, the person you want may not agree to serve as your agent.
An agent under power of attorney can have broad or limited legal authority to make decisions and transactions on your behalf about your property, finances, and medical care. The agent's power is derived through your permissions, and if you are dissatisfied with your agent, you can revoke the POA/agent relationship and create a new one. Your power of attorney must comply with state law. When you work with us, we will make sure yours complies with all applicable laws.
There are a few misconceptions about the power of attorney. The first is you can create an agent under POA on your behalf after you are incapacitated. You cannot do so, as that would be too late. For your power of attorney to be valid, your agent must be appointed before you become incapacitated through illness or disability. If you do not have your agent legally in place before you become unable to manage your affairs, it may be necessary for a court to appoint a Conservator to act on your behalf. To avoid having someone making decisions for you that you would not have chosen, you should sign a well-prepared power of attorney before you become incapacitated.
Another misconception is that your agent under POA can make whatever financial decision they want to about your estate and that all power of attorney documents are the same. Your selected agent, by law, has an obligation known as a “fiduciary duty” to make decisions in your best interests. This responsibility is why it is important to choose a trustworthy agent as it can help avoid challenges to and litigation of your estate. You must have full confidence in the actions your agent will take on your behalf. You can also appoint different agents for different POA functions. We can help you figure out which powers should be given to which agents. For example, you may want one agent handling real estate transactions while another handles your bank accounts on your behalf.
Selecting an agent and preparing a financial power of attorney is an important part of your overall estate planning. We would be happy to help you and welcome your call.