Setting up a power of attorney is one of the most important estate planning tools a person has. Why is this? A power of attorney is a document you create that authorizes someone to manage your affairs and act on your behalf if you become incapacitated or otherwise unable to manage your affairs.
There are two kinds of powers of attorney. The first is a medical power of attorney, which grants power to an individual you name to make medical decisions for you if you become incapacitated, sick, or injured and cannot advocate on your behalf. There are also financial powers of attorney, which grant power to an individual to make the more day-to-day decisions on business and financial affairs.
Your agent can be a person or a professional company.
A lot of thought goes into who you designate to step into your shoes when you cannot. It’s important to do this now while you have the benefit of forethought to assign certain responsibilities to one or various agents.
A power of attorney for legal and financial affairs can authorize either a natural person (a human) or a professional entity (such as an accountant or law firm). You may designate a broad range of duties to one person —duties like conducting business transactions, hiring assistants, filing tax returns, paying bills, etc. On the other hand, there may be other affairs you wish to designate to a skilled person or entity—investing, banking, handling mail, specific business operations, etc
Is Your Agent Someone You Can Trust?
One thing is for sure: Whoever you appoint as an agent in your power of attorney should have your unfettered trust in their integrity. Think about why: the agent has the legal authority to handle your affairs when you’re incapacitated and cannot object to the decisions being made on your behalf. Unfortunately, many times, an agent has abused this power and used it to enrich themselves by dishonestly transferring assets to themselves and others. On the medical side, this person may literally be making life or death decisions.
Your agent should also have your trust in their ability to carry out the role. Consider whether the agent has the capacity to carry out their duties with a reasonable amount of skill and diligence.
Who Will Be a Back-Up Agent If Your Agent Cannot Fulfill Their Duties?
Another consideration when drafting a power of attorney is who the alternate agents will be if your agent becomes incapacitated themselves or cannot fulfill their role by circumstance. Also, consider that because an agent can serve doesn’t mean the agent will serve. A named agent may play a proverbial game of Hot Potato and deny their designation to avoid the responsibility and inherent liability. This situation can be avoided by having depth in your roster of agents. In your power of attorney, you can name who will step in once the succeeding agent is unable to.
A well-drafted power of attorney accounts for all contingencies. If there is an agent role that still needs to be filled and there are no alternates in the document (or there are no available alternates left), the document can designate a party who has the power to name agents.
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If you would like to discuss your estate plan with an attorney as soon as possible, great! We would love to hear from you. You can reach out to us here. We would also like to invite you to attend one of our informative and interactive workshops. You’ll leave the seminar with newfound knowledge on making your estate plan work for you, avoiding common pitfalls, and the answers to some of our most frequently asked questions.