A durable power of attorney is one of the most important estate planning documents you can have. It allows someone who you appoint (your agent) to make decisions on your behalf in the event you become incapacitated. If you have not appointed an agent then your friends and family will not have the authority to make decisions on your behalf. In that case, a guardianship may have to be sought and a judge will be the person appointing someone to make decisions for you and manage your financial affairs. Guardianship proceedings are expensive and tedious.
While a durable power of attorney (POA) is one of the most common estate planning documents, it is also one of the most misunderstood. This article will break down some of the common misconceptions regarding POAs and help you understand what you need to create a valid POA.
Misconception: Technology is so great now, there is no need to speak with an attorney, I can just create my own POA online or buy a software at the local office supply store.
Truth: POAs are not one-size-fits-all and they are not all created equal. Each person’s situation is unique. If you use a cookie cutter program it may not cover specific transactions. In order to conduct many financial transactions specific language must be used to grant proper authority. It is often a situation of you don’t know what you don’t know. Estate Planning and Elder law attorneys create POA documents regularly which gives them valuable experience in unique situations and can make sure you have all your bases covered. You are not just paying for a document, you are paying for the advice and counsel of someone who knows where the landmines are located.
Misconception: POAs are one-and-done documents. Once I create it I will never have to touch it again.
Truth: POAs are documents that should be updated regularly. Laws change and if you have not regularly updated your documents you may find out too late that your POA is not valid or does not provide authority for certain actions that have become a part of the standard form. Recent changes in the law in Texas added some significant choices in the standard POA form. While the law in Texas has changed to allegedly make it more difficult for a financial institution to refuse to accept a POA (particularly for being “stale”/too old), it is still possible for them to do so.
Misconception: I shouldn’t make my POA active until I become incompetent (a “springing” POA).
Truth: While the timing of granting agency through a POA is a matter of personal preference an immediately effective POA should be considered. A springing POA usually requires a finding of incompetency by at least one doctor and sometimes two. However, there may be an emergency where a doctor will not sign off that you are incompetent. Making your POA effective immediately removes the need for a doctor to declare you incompetent. The fear expressed about making the POA effective immediately is that the principal (you) are worried that the agent might do something you do not want them to do. Any good estate planning attorney will tell you that if you do not trust the person you are naming to do the right thing for you, then you should not be naming them in the first place.
Misconception: I don’t need a POA, I’m young and healthy, plus I don’t have many assets.
Truth: Every single person over the age of 18 should have a POA. You never know when something catastrophic may happen. It will be difficult for your parents to step in and gain access to what you do have to manage things for you while you can not do it for yourself. You need to have a plan in place to take care of you in the event you become incapacitated unexpectedly. If you do not have these documents in place then you have no control over who will be making decisions on your behalf. It can be expensive and time consuming for your loved ones to go through the court to have one of them appointed by a judge even if on a temporary basis.
POAs are absolutely essential documents that everyone should have. It is the centerpiece of disability planning. It is important to consult an elder law attorney who can examine your unique situation to create your POA and to keep it updated. Please do not hesitate to contact our office if you would like to speak with an attorney about creating your own POA.
If you would like further information or assistance getting your estate planning affairs in order, please contact Euless, Texas Estate Planning and Elder Law Attorney, Antoinette Bone, at (817) 462-5454 or email [email protected]
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