Here are five issues for you to think about before you sign a Financial Power of Attorney.
- Consider including options that can limit the potential for exploitation by your agent – for example: (1) limiting your agent’s power to make gifts, (2) naming co-agents who must agree, or (3) requiring reporting by your agent to a third party.
- Don’t rely on a “cookie-cutter” power of attorney form that you purchase from a store or online. Don’t be “penny wise and dollar foolish.” Your power of attorney should be drafted with care and adapted to your particular circumstances, needs, and goals.
- Have an in-depth discussion with your lawyer about whether to give your agent the authority to make gifts on your behalf. Failure to have the appropriate gifting provisions in the document is one of the most frequently encountered problems with powers of attorney. This failure can delay your qualification for Medicaid and VA benefits, result in the need for guardianship or other court involvement, and create the potential for litigation between family members. If your lawyer doesn’t raise this issue, you should bring it up yourself.
- Consider whether to waive “fiduciary duties” for trusted family members. For example, you may or may not want your spouse or child burdened with state mandated record-keeping mandates. Record-keeping requirement, prohibitions against self-dealing and commingling funds, and other fiduciary duties can be waived when the power of attorney is created, but the waiver must be explicit.
- Depending on your goals, consider protecting yourself from the inappropriate use of gifting powers by the agent. You can build in protections against abuse of gifting power by:
- requiring that all gifts be approved by persons other than the agent;
- limiting the persons to whom gifts can be made (e.g., allowing gifts to be made only to your spouse);
- requiring that gifts be made in equal amounts – for example, to all your children equally;
- requiring that the agent report all gifts made by the agent (e.g., to another family member).
Every older adult should have a financial power of attorney. A well-considered power of attorney is a key to protecting yourself as you age. But beware of using a standard form. Your power of attorney is too important to buy online or sign without expert legal advice. It can protect you but it also can put you at great risk. And think carefully about the powers you want to give to your agent.
The best power of attorney document will be finely tailored to meet your goals, given your unique circumstances, concerns, and needs, while protecting you from the potential for abuse. This is not a simple planning document.
