The benefits of a comprehensive Power of Attorney (aka Financial Power of Attorney, Durable Power of Attorney) are numerous. If done properly, a Power of Attorney can make progressing through life seamless. Unfortunately, many Powers of Attorney just don’t hold up and can actually cause problems, especially if they are old.
To begin, a properly drafted Power of Attorney allows the principal creating the Power of Attorney to appoint an agent to act on his or her behalf during his or her lifetime. It's a big deal. It's a powerful appointment.
Are there risks? Yes. There are risks to appointing an agent, especially if you pick the wrong person. However, when an agent is thoughtfully and carefully selected, a Power of Attorney is a tremendously beneficial tool to have in your estate planning toolbox.
Below are my top 5 reasons why everyone NEEDS a comprehensive Power of Attorney.
1. Control over naming who can step in and act.
If someone has signed a Power of Attorney and later becomes incapacitated, the named agent can step into the shoes of the incapacitated person and make important financial decisions. There is no need for costly guardianship and/or conservatorship actions in court and there is no fighting over who should be the one because the principal already chose their agent.
2. A comprehensive Power of Attorney can be flexible to meet needs quickly and prevent delays in planning.
As people age, their needs change. A Power of Attorney with a trustworthy agent meets those changing needs and meets them quickly. It grants the agent access to accounts, records, and digital assets to effectively manage bank accounts or services. In addition to managing life, a properly-drafted Power of Attorney should allow for the power to complete asset preservation planning should the need arise. This can include being able to address choosing and paying for care as well as applying for benefits.
3. A Power of Attorney also protects the agent from claims of financial abuse.
Comprehensive Powers of Attorney often allow the agent to make gifts, not only general gifts but also potentially sizable gifts in connection with asset preservation or benefits application goals. Without clear, documented authority, the agent (often a family member) could be at risk for financial abuse allegations.
4. Having a Power of Attorney provides peace of mind for everyone involved.
Taking the time to sign a Power of Attorney reduces the stress placed on the family when incapacity strikes. Family members who would otherwise have to go to court to get authority to conduct basic business-of-life tasks such as paying bills or arranging for care have an easy way to step in and care for their loved ones.
5. A Power of Attorney provides family members with a good opportunity to discuss their wishes.
Having already mentioned the reliability and honesty considerations, there is much thought that goes into the creation of a comprehensive Power of Attorney. Naming an agent creates an opportunity to discuss important considerations and wishes with the family and the agent.
Nobody can predict the future; but having a well-thought, comprehensive Power of Attorney in place will make life easier should the need arise.