A power of attorney (POA) is a legal document that allows the person signing the contract (known as the principal) to elect someone else (agent) to manage their decisions. The agent then has the power to control the principal’s property, financial, and medical affairs if they become incapacitated or unable to do so.
There comes a time in everyone’s lives where having a power of attorney is vital. However, it is essential to know that there are multiple POAs, and they are not equal. A general power of attorney gives your agent complete control over all your personal and organization’s financial decisions. These powers include managing your business transactions, taking crucial insurance decisions on your behalf, and recruiting employees.
A POA includes a clause of durability provision if you become ill or psychologically incapable of making decisions. However, it would be best to specify in your contract that your power of attorney cannot go into effect unless your doctor has diagnosed you. A special POA limits the capabilities of your agent to a particular area. For instance, you can allow your agent only to collect debts or make business transactions in your absence. As the name suggests, a healthcare POA allows your agents to manage your affairs on your behalf when you are unwell.
Familiarizing yourself with different POAs is critical to decide what level of power you want your agent to have. However, there are other things you should know about a POA, some of which we have discussed below.
⦁ The power
You must understand that a POA is one of the most potent legal documents. It gives your agents control over all your assets, bank accounts, and everything else (or which you have specified) in your name. Under a POA, your agent has the full capability and ability to engage in decision-making without your approval, presence, or oversight. If you want an in-depth understanding of what does a power of attorney do, you should continue reading this blog.
⦁ Steer clear of frauds
Your appointed agent is an immensely consequential individual. Altering clauses and twisting words in your POA contract is a prevalent fraud amongst many agents. Especially when the principal isn’t well-versed with legal documentation, since they have access to your financial accounts, they might steal or launder your money. Hence, trusting anyone with your POA is an unfavorable and deficient idea. You need to ensure that your agent is dependable.
Remember, you are allowing someone to make some of your most significant business and life decisions. Therefore. Hiring a trustworthy agent should be the first of your concerns. An agent doesn’t necessarily have to be a professional. Instead, you can give any of your family members POA as well. The core issue here is trust. So, it will be favorable to appoint someone without an imperfect decision-making past.
⦁ More than one agent
Multiple agents can be a handful, but it is always a good idea to have an extra pair of eyes. Having two agents can considerably reduce abuses and fraud and ensure your assets and financial transfers occur as per your will.
However, having multiple agents can also cause delays, chaos, lead to disagreements and fights? Hence, giving more than two agents POA might not be a good idea in some instances. For instance, if you make all your five children, your agents might slow down the process when all of them are required to sign papers simultaneously. It is also possible that they might not get along, and the situation will remain a bone of contention indefinitely.
⦁ Hire a backup agent
Instead of hiring multiple agents at the same time, you can also hire a backup agent. An alternate agent comes into action when you fire your older agent, your agent no longer wants to continue with the job, or he dies before you.
Having a backup agent ensures there are no slowdowns or halts in the process due to unforeseen circumstances.
⦁ You still have power
Giving power of attorney to an agent does not mean you have no control over your affairs. If you wish, you can even get an additional clause added stating that you remain the dominant decision-maker whenever you want to take charge. Adding such a clause can eliminate the risk of mishandling and ensures your agent(s) takes decisions more cautiously.
Since your power will always be above your agent’s, you can immediately lay off your agent if you ever become suspicious.
⦁ Your agent loses the POA after your passing
Your agent’s power is only valid until your lifetime. Once you die, your agent no longer has any control over your personal or professional affairs. After your death, all decisions occur as per your will. If you did not constitute a will during your lifetime, the case is taken to court and resolved through lawyers and judges. In any case, your agent has no legal authority to act under the document after your death. If an agent is doing so, they are getting involved in illegal and inappropriate actions.
Several people also confuse a will executer with a POA agent. They believe hiring both can be confusing since both notions might contradict. However, as mentioned above, your agent loses their POA right at the moment of your death. Whereas a will executer’s job only comes into action after your passing. Hence, both serve an entirely different role, and hiring both is highly crucial.
⦁ Proofread your documents
We cannot overstate the significance of proofreading your POA documents. Even though it is quite an obvious point, several clients often don’t read their documents and blindly sign them. If you are doing so, you are indirectly welcoming abuses. It’s a dog-eat-dog world, so please be careful and read your documents thoroughly and precisely.
Consider hiring a separate lawyer to read and accept your POA documents. Your lawyer can help you decide to amend or add powers. For instance, whether you’d like to give your agent control over your recoverable trust or not.
Having a power of attorney saves you the trouble of going through the tiring and time-consuming process of court hearings and decisions. Instead, POA provides you the ability to hire a trustworthy agent to make decisions for you. The most significant benefit of having POA is the elimination of disagreements and fights. A well-drafted POA prevents questions about the principal’s intent. It encourages family members to avoid disputes regarding their loved one’s wishes. Power of attorney ensures timely planning and significantly reduces the burden on family members to take control.
Hence, having power of attorney is crucial. But, it would help if you were cautious about to whom and how much power you hand over.