A power of attorney is an important document in your estate plan. You want to make sure it is done correctly to prevent unintended negative consequences. A comprehensive estate plan includes a revocable living trust, a pour-over will, a power of attorney, and various healthcare documents.
A power of attorney gives another person the ability to act on your behalf for specified legal and financial matters. Depending on how it is written, a person may be given immediate power to act on your behalf or reserved power to act on your behalf that must be triggered by either your incapacity or death. A power of attorney requiring a triggering event is called a springing power of attorney. Many powers of attorney give immediate power. Even though this may be a more convenient option, it can cause multiple problems.
I had a client relate the following story to me as we were discussing how she and her husband wanted to draft their powers of attorney. Her father had served in Afghanistan with a man I will call Randy. The military provides their soldiers with a basic will and power of attorney. When Randy had finished his military assignment, he returned home, excited to be reunited with his family. Randy’s wife and children met him at the airport; however, the highly anticipated reunion was soured by unfortunate events. During Randy’s deployment, his wife had sold all of his guns, many personal belongings, his car, and their house. She served him with divorce papers right at the airport! Randy’s wife had been given immediate powers when he signed his power of attorney. Many of Randy’s wife’s actions could have been avoided had he used a springing power of attorney.
Other more common issues associated with an immediate power of attorney occur when a spouse passes away and the alternate agent is now able to act for the surviving spouse. The alternate agent could take out a HELOC on the surviving spouse’s home or encumber it in some other way. The alternate agent also has access to the surviving spouse’s bank accounts. The alternate agent can act for the surviving spouse in any way allowed by the power of attorney. It is always safer to have a springing power of attorney.
If you need a power of attorney or would like me to review your current power of attorney, give me a call. at (385) 439-0247.