Has someone you know asked you to execute a power of attorney naming them as your Agent? If so, do not sign the power of attorney without having an experienced Missouri estate planning attorney review it first. Although a power of attorney, or POA, is a commonly used legal tool, it can also be a powerful tool that should only be executed if drafted, or at least reviewed, by an estate planning attorney.
What Is a Power of Attorney?
At its most basic, a POA is a legal agreement that allows you (the “Principal”) to grant another person (the “Agent”) the legal authority to act on your behalf in legal transactions or legal matters. The extent and type of power granted in a POA depends on what type of POA is executed and on any restrictions imposed by state law.
General vs. Specific
A Principal can create a general or a limited POA. A general power of attorney grants an Agent almost unlimited power to act on behalf of the Principal. This means the Agent can do things such as enter into a contract in the Principal’s name, sell or encumber assets owned by the Principal, or even withdraw funds from an account owned by the Principal. For this reason, it is imperative that you think long and hard before executing a general power of attorney.
A limited, or special, power of attorney only grants an Agent specific, limited, powers to act on behalf of the Principal. For example, you might give an Agent a limited POA that allows the Agent to facilitate the sale of your home at the closing because you plan to be out of the country on the date of the scheduled closing. Parents also typically grant a caregiver the limited POA to consent to medical treatment for a minor child during the time period a child will be in their care.
Durable and Springing POAs
When a POA is “durable” it means that the Agent’s authority will survive the incapacity of the Principal. In some states, a POA is now assumed to be durable absent language to the contrary whereas in other states the converse is true – a POA is presumed not to be durable unless the document includes specific language making it durable. Be sure you know what the law stands in the state where you plan to execute your POA.
A “springing” POA means the authority granted in the POA will only “spring” into action upon the occurrence of a specified event. For example, you might execute a springing POA that only becomes active if you are out of the country or otherwise unavailable.
Mistakes You Could Make in a POA
Making a mistake in a power of attorney could be very costly, particularly if it results in giving someone unintended authority over you or your assets. Consider several of the most common POA mistakes:
- Granting an Agent too much power. If you are unfamiliar with the power conferred in a POA and/or the different types of POAs you could easily grant an Agent too much power which could have very serious negative consequences. People frequently sign a general POA without understanding the breadth of power granted in the document. To avoid making this mistake, it is best to use a limited power of attorney unless a general POA is really necessary. Even better, by having your Missouri estate planning attorney draft the POA you are ensured that you will not grant more power than is necessary to accomplish the intended goal.
- Naming the wrong person as your Agent. People often name a spouse or an adult child as an Agent without giving any real thought to whether the individual is the best choice or not. Do not, just name someone because you feel obligated or pressured. To avoid this mistake, take the time to understand the power you are granting and contemplate the best person for the position and always discuss your choice with your estate planning attorney!
- Using the wrong type of POA. Using a general POA when a limited POA will suffice is certainly a mistake. The converse is also true – using a limited POA when a general POA is needed can also create problems. In addition, if you are counting on your POA to be used as an incapacity planning tool it will need to be “durable.” Sometimes, a “springing” POA is actually the best choice given the objective. Unfortunately, people frequently just use a form they found online or at a local store instead of taking the time to figure out what type of POA they actually need. Avoiding this mistake requires you to fully understanding all the various types of POA’s, which is yet another reason why you need the assistance of an estate planning attorney.
- Executing a worthless POA. How can a POA be worthless? There are several ways actually. You might designate someone as your Agent who, by law, cannot be your Agent, such as your treating physician. Similarly, you might execute a POA with the intention of giving someone the authority to make medical decisions for you when, in fact, only a specialized type of POA known as an “advanced directive” can accomplish this goal.
Contact Us
If you have additional questions or concerns about executing a power of attorney, contact the experienced Missouri estate planning attorneys at Amen, Gantner & Capriano, Your Estate Matters, LLC by calling (314) 966-8077 to schedule an appointment.
- Advantages of Using a “Grantor Trust” in Planning - October 14, 2021
- Tax Reporting with Trusts - September 30, 2021
- Roth IRAs Can Be a Great Planning Strategy: Advanced - August 5, 2021
