Power of Attorney mistakes
When in need of legal advice concerning estate planning, in general, and specifically, Power of Attorney, many people make the mistake of eliciting it from family members or friends who have dealt with similar issues in the past. However, if a Power of Attorney is done incorrectly, it could result in significant complications and needless stress for both you and your family.
A POA is an essential part of a comprehensive estate plan. Creating a financial power of attorney need not be difficult or complicated, but it does need to be done correctly. You need to understand its limitations as well as how to capitalize on the benefits that it can provide.
So, why is it so important to have a financial POA as part of your estate plan? Because you want someone that you trust to manage your assets, pay your bills, and make other financial decisions for you should you become incapacitated. If a POA is correctly created, the person that you have named to act as your “agent” takes over for you, manages your financial affairs, and continues in his or her capacity as long as you need them. In other words, that transition should be a smooth one, with no “bumps” in the road.
However, there are a number of mistakes that could be made which you and your family should try to avoid when establishing a financial Power of Attorney.
What to avoid
One of the biggest mistakes to avoid in not planning ahead and establishing a Power of Attorney in the first place. Without one in place, should you become incapacitated, the control of financial management will revert to the state.
When creating your financial Power of Attorney, you can give your agent a lot of authority or very little authority. Some people make the mistake of giving their agent authority over the property they currently own, but you don’t know how that will change in the future. Perhaps you will inherit some stocks or open a start-up down the road. By not giving enough authority to your agent, he or she will not have the authority to act for you when it comes time to manage these assets.
The best option is to give your agent(s) general authority over all types of property, even property that you do not currently own. If you have doubts or concerns about the ability of your agent to manage certain types of property, you can create a limited Power of Attorney, set up a trust, or rely on a court-supervised guardianship.
Other mistakes to avoid include:
- Naming your agent joint owner of your bank account
- Not working with your financial institutions in advance
- Not understanding the duties of your agent
- Not using your POA once it is signed
- Failing to include gifting instructions
- Failing to include sufficient instructions, in general
By not working with your attorney when creating a POA, you are in danger of making any or all of these costly mistakes.
Have questions? Ask an attorney
Do you need to set up a Power of Attorney for financial matters? Avoid Power of Attorney mistakes by contacting the Law Office of David W. Foley, San Diego estate planning attorney, for more information on all types of POAs and other estate planning services.