Powers of Attorney: Practical Tips for Executing, Using and Revoking

By Thomas D. Begley, III, Esq.
Co-Authored by Brittany A. Verga, Esq.

Although most people initially think that a Will is the cornerstone of estate planning, it is often asserted that the most important document is a power of attorney. A power of attorney is a document in which one individual vests authority in another to act on his or her behalf. Unfortunately, many problems arise in the preparation and use of this document. This blog will share some practical tips to help avoid these issues and insure that a power of attorney is a useful tool in the event of an individual’s disability.

1. What type of power of attorney? Everyone should have what is known as a general durable power of attorney. The person who executes the power of attorney is known as the principal. The person who is given authority to act on behalf of the principal is known as the agent (or the attorney-in-fact).

The document should be extremely thorough. For many years, a power of attorney only needed to be a few pages. However, over the past few decades, financial institutions, government agencies and medical providers will not accept a power of attorney unless the actions which an agent wishes to perform are specifically set forth in the document itself. Many financial advisors communicate that their companies reject one-third to one-half of the powers of attorney that they review. A qualified estate planning attorney should be engaged to make sure the power of attorney is drafted properly. Although there are forms on the internet, remember the old adage: “You get what you pay for.”

2. Who should be my agent? One of the fastest growing forms of probate litigation over the past twenty years has been fiduciary abuse and neglect. Although there is no guarantee that a power of attorney will not be abused, the chances can be minimized. Unfortunately, many individuals select their agent for a power of attorney based on their age, gender, proximity or a desire to not hurt someone’s feelings. The cases of fiduciary abuse and neglect almost always arise from this absurd form of decision making. Agents should be selected based on two primary factors: (a) integrity and (b) common sense.

3. What types of powers of attorney should I execute? At the very least, an individual should execute a general durable power of attorney to handle financial and personal matters and a health care power of attorney to assist in the handling of medical decisions. The two should not be combined. Doctors and medical staff do not want to root through the financial provisions of a lengthy document to find the provisions that apply to health care. In addition, the individual who is best suited to handle financial decisions may not be the best person to handle medical issues, and vice versa.

Although lawyers have different practices, some also add a real estate power of attorney and a banking power of attorney. Those powers should be included in the general durable power of attorney. However, many banks prefer a shorter specific document. In addition, the recording fees in states like New Jersey make it more practical to have a shorter power of attorney recorded for the sale, purchase or financing of a home.

4. How many powers of attorney should I execute? Many individuals run into an obstacle when they only have one original power of attorney to use. A title company may need to record the original for a real estate closing, which will leave the agent unable to handle other financial matters of the principal until the power of attorney is recorded and returned. In addition to having different types of powers of attorney to address this situation, it is practical to execute three sets. I maintain one set for my clients and provide them with two. On many occasions over the years, for example, I have received calls from an agent who rushed to the hospital to address a medical crisis of his principal, but inadvertently forgot to bring the health care power of attorney. When we receive these calls, we are able to calm the agent’s concerns by sending over our original.

5. Where should I keep my power of attorney? Simply, these documents should be kept at a place in your home where your agent can find them when needed. They should not be kept in a safe deposit box. (For example, if the principal is rushed to the hospital on a weekend night, the box will not be accessible.) Unless the principal is elderly and in immediate need of assistance, it should not be given to the agent, as it should not be accessible to use until needed.

6. What if I change my power of attorney? The execution of a new power of attorney does not automatically revoke the old power of attorney. However, a power of attorney should include language stating that execution of the same revokes any and all prior powers of attorney. You should destroy the old power of attorney and any copies. If the agent has one, he or she should be notified that it is revoked and that the original should be returned to you to be destroyed. In the event that there is a new agent, any financial institution which may be relying on the power of attorney should be provided with written notification stating that the old power of attorney has been revoked.


Tags: ,

About the Author

Post a Reply

Your email address will not be published.

This site uses Akismet to reduce spam. Learn how your comment data is processed.