A power of attorney is an estate planning document that gives one or more persons of your choice the power to act on your behalf. POAs can be used for various circumstances, and agents can be granted the authority to make financial to medical decisions on behalf of a principal.
Having a POA is beneficial as it allows people you trust to make crucial decisions for you. Unfortunately, POAs are plagued by plenty of misconceptions that can result in irreversible complications in the future.
Read on to learn more about these power of attorney myths and avoid the pitfalls they commonly entail.
Misconception #1: A Power of Attorney Grants the Agent Unbridled Control Over Your Assets
Many believe that, by creating a power of attorney document, they are giving another person unrestrained control over their assets. They are worried that the agent they chose will use this opportunity to take advantage of their estate.
This is a valid concern, as POAs do give agents a range of authorities. However, they are legally obligated to act in your best interests. If a specific action is not beneficial or advantageous for you, agents lose the right to act despite having the power to. They may even be subject to court review and removal.
Ultimately, the key is to appoint someone you trust as your agent and understand which type of POA you want to grant them.
Misconception #2: POAs Can Be Used to Alter Your Will and Estate Planning
Powers of attorney authorize another person to make financial and business decisions on your behalf, such as handling your financial accounts or managing your digital assets. Still, it has its limitations. While Powers of Attorneys may grant the agent the power to carry out estate planning your behalf, typically such planning must be consistent with your wishes in your current planning.
Misconception #3: A POA Makes You Relinquish Your Independence
Since POAs give agents significant power over your legal or financial affairs, it’s easy to think that creating such a document means giving up the power to make your own decisions.
The reality is that a well-written power of attorney works for your convenience. You can still oversee your affairs as usual. But with a POA in effect, you have a legally appointed individual who can make decisions for you when you can no longer do so independently.
Misconception #4: It’s Fine to Use POA Documents Found Online
While the internet is rich with resources you can use when studying estate planning, power of attorney, and other legal documents, using POA forms found online is discouraged. You want your POA to be explicitly tailored to your unique needs and circumstances. Further, templates available on the internet may not include crucial details such as the legal requirements in South Carolina.
Since this document directly impacts what happens to your affairs in case of an accident or unexpected illness, it’s best to avoid using forms from an untrusted source. Instead, work with estate planning lawyers when writing a POA. They will put together a document relevant to your circumstances and up-to-date with the state’s requirements.
Misconception #5: All Powers of Attorney Are the Same
There are different types of POAs, and they are meant to accommodate varying needs and circumstances.
General Power of Attorney
A general POA grants broad powers to an agent, usually involving managing real estate properties, bank accounts, and other assets. However, the agent’s authority ends when the principal passes away or becomes incapable of making informed decisions independently.
Limited or Special Power of Attorney
As the name suggests, this POA limits an agent’s authority to certain powers. For example, an SPA can grant an authorized individual the power to sell a real estate property on behalf of the principal. Once the transaction is done, the SPA will end.
Durable Power of Attorney
The main difference between a general and durable power of attorney lies in the principal’s incapacity. Agents appointed by a durable POA can continue to oversee the principal’s affairs on their behalf, even if they become incapacitated or incompetent.
Similar to the general power of attorney, this POA also loses its effectiveness if the principal dies.
Misconception #6: POAs Are Only for the Elderly
Many believe that preparing estate planning documents like powers of attorney only concerns the elderly and the sick.
Regardless of your age or health, it helps to remember that accidents and unexpected illnesses can happen at any time. Creating a POA while you are still mentally and legally competent to do so is an excellent way to ensure your assets will be managed well – and that your loved ones are protected from suffering, confusion, and financial hardships.
Misconception #7: POAs Always Work
According to the Wall Street Journal, an alarming number of banks and financial institutions often reject power of attorneys. The New York Times, in an article entitled “Why Is My Power of Attorney Powerless” also points to this trend.
Why is this occurring? Why are powers of attorney being rejected? The reason is many banks and financial institutions do not want to be a party to fraud. They are concerned the Power of Attorney that is presented to them might no longer be in effect. The financial institution fears that by honoring the POA, they may be actually going against their client’s wishes and giving their customer’s money to someone who may steal or misuse the funds. In many cases, financial institutions do not want to take on this liability.
What is the solution? Having a POA is better than not having one. For all the reasons previously mentioned a POA is important. In addition to having a POA, for many Americans a revocable living trust is an additional control to ensure the right person is in charge. The likelihood of a trustee being rejected is much lower than the likelihood of a POA being rejected.
For Questions and Clarifications About Powers of Attorney, Consult Our Attorneys for Free
We hope this blog helped clear some common misconceptions surrounding power of attorney. If you want to learn more about creating POAs or need assistance in estate and trust planning, the knowledgeable attorneys at Wiles Law are here to help. Please don’t hesitate to contact us for a free consultation. We’d love to help you get started in preserving your legacy.