Creating a power of attorney is a very important component of your estate plan and steps should be taken to ensure it is not ever misused. A power of attorney allows a person you appoint — your “attorney-in-fact” or “agent” — to act in your place for financial purposes when and if you ever become incapacitated. When deemed as lacking the necessary capacity to manage your own affairs, the person you choose will be able to step in and take care of your finances.
Unfortunately, it is not possible to entirely prevent the possibility of abuse, but here are 4 tips to reduce the chances:
Tip #1: Make sure you appoint someone you trust as your agent. You must feel confident that this person will keep your best interests in mind at all times. If you do not have any family members or friends that fit this bill, there is always the option to choose a professional such as an accountant, bank or trust company.
Tip #2: Name a trustworthy back-up or
successor agent as well. Be clear in your power of attorney document about when
the successor takes over.
Tip #3: Very important! Add a clause in your power of attorney document that requires your agent to provide an accounting to a third party on a consistent basis. This does not have to be formal. The third party could be another family member or friend. Having another set of eyes on all the transactions is the best way to prevent an agent from exploiting a principal.
Tip #4: Discuss the powers being
conveyed very carefully with your estate planning attorney to make sure you are
giving the agent enough powers to carry out your financial affairs but limit
any excess powers such as the power to give gifts.
You should never draft and sign a power of attorney document without advice from an experienced estate planning attorney. Contact Stouffer Legal at 443-470-3599 in the Greater Baltimore area for a consultation.