Watch out for these pitfalls when appointing a power of attorney

This article looks at three of the biggest mistakes people make when drafting a power of attorney.

As CNBC points out, a power of attorney is one of the most important documents in any estate plan. While there are many different types of powers of attorney, for most people the most important one is that which appoints an agent to handle a person’s financial affairs if they are unable to do so themselves (such as if they are in a coma or suffer from a mental disability). Because a power of attorney bequeaths a large amount of power on agents, it is important that drafting a power of attorney be done with careful attention paid to avoiding the following pitfalls.

Conflicts with other surrogates

Forbes rightly notes that a power of attorney is just one estate planning document that can result in a surrogate acting on another person’s behalf. For example, an executor will handle the distribution of an estate’s assets, a trustee will manage a trust, and a health car power of attorney will handle medical decisions. In some cases, surrogates may have overlapping responsibilities, which can create potential for conflicts. An estate planning attorney can help clients ensure that each of their surrogates has clearly defined roles.

Choosing unqualified agents

An agent appointed by a power of attorney has the ability to make life-changing financial decisions on behalf of another person. Given the amount of power vested in an agent, it is surprising that many people choose such agents with little regard to their qualifications. While appointing somebody who is trustworthy should go without saying, it is also a good idea to appoint someone who has the financial expertise necessary to know how to responsibly handle someone else’s money. Certainly, a person who is languishing in debt or who has recently declared bankruptcy should not be given power of attorney.

Not notifying agents

Many people don’t learn that they have been given power of attorney over a loved one’s financial affairs until that power of attorney comes into force. By that time, the agent may not know what their loved one actually expected them to do with their financial accounts. To avoid such stress and unwanted situations, when drafting a power of attorney it is essential that the designated agent be notified that they have been so designated. Having power of attorney is a big responsibility and one that most people do not want foisted on them without warning.

Estate planning help

Estate planning decisions should never be left to chance or fate. An estate planning attorney can help clients create an estate plan that addresses essential long-term financial and healthcare issues, including assisting them with drafting a power of attorney.