A power of attorney is one of the best estate planning tools available. Most people who create an estate plans will use two of these important documents, and sometimes more. Unfortunately, there are some people who have some decidedly mistaken perceptions and beliefs about what a power of attorney is, does, and does not do. Here are several of these power of attorney myths you should avoid.
Power of Attorney Myth 1. Your agent will take advantage of you.
Powers of attorney are documents. These documents give you the ability to give another person the legal authority to represent you and make decisions for you. The person, or organization, you select is called your agent. Whether your power of attorney is limited or broad, the agent you choose will gain some significant rights that will affect your life.
However, just because you give an agent the legal authority to represent you, that doesn’t mean your agent has the right to take advantage of you. Your agent under financial power of attorney cannot, for example, simply start giving away your property to anyone he or she chooses. Though there is nothing to physically stop this from happening, there are legal recourses that take effect should an agent abuse his or her position. In some situations, agents who act contrary to the interests of the principal—the person who appointed them—can face criminal charges.
Power of Attorney Myth 2. I can use a power of attorney to have someone represent my estate after I’m dead.
Regardless of the type of power of attorney you create, any agent you appoint will automatically lose his or her decision-making rights upon your death. No power of attorney can last after the death of the principal, even if you create a durable power. Additionally, if you create a non-durable power of attorney, your agent’s right to represent you terminate automatically should you become incapacitated.
If you want someone to represent your estate after you’re dead, you will need to appoint a different representative, called an executor, through your last will and testament. Unlike your agent, your executor has no authority to represent you while you are alive, and is only responsible for representing your estate after you die.
Power of Attorney Myth 3. My power of attorney complies with the law, so my bank must accept it.
Making a legally valid power of attorney is one thing, but getting a third-party to recognize it is another. Many organizations have policies that may make it more difficult for your agent to represent you. In these situations where you know your agent will deal with third parties, it’s always best to contact those parties beforehand so you know what you will have to do to get them to accept the power of attorney.