go60.us Legal Ease Column
After many years of procrastination, my wife and I have finally decided we need to complete our estate planning. All we have are the same simple wills we prepared when we first got married 25 years ago. We haven't met with a lawyer yet because I want to make sure that I have educated myself sufficiently regarding the process so that I can engage in a meaningful conversation with the lawyer and ask the right types of questions.
One of the documents I have been reading about is a financial durable power of attorney. I understand why that is an important document to have, but I do have one major concern: how do you avoid having the person you name as your agent ripping you off? I am somewhat of a control freak and I am having a real hard time even thinking about giving someone, even my wife, the right to handle all my financial matters for me. Am I missing something or over-thinking this?
A financial durable power of attorney allows you to appoint another to handle financial matters on your behalf if you can't due to being disabled, or, in some cases, if you are simply unavailable. You are correct that this is an important document to have and your concerns are legitimate. In fact, several of my clients over the years have raised this same concern. In essence, the person you name as your agent under a financial durable power of attorney has the ability, by virtue of their position, to benefit themselves to your detriment.
The question is how can you avoid this from happening? There are a few things you can do to address this concern. First and foremost, it is essential that you name someone you trust to act as your agent; someone you know who will only act keeping your best interests in mind. Obviously, this is not fool proof in and of itself because people who have previously been trustworthy have been known to take advantage of that trust to the detriment of the person they are supposed to be protecting. However, naming someone you trust is a good starting point.
Secondly, if you are willing to sacrifice some flexibility, you can design your financial durable power of attorney as one that only becomes effective upon your disability. In other words, this type of power of attorney cannot be used if you are unavailable, i.e., out of town, and can only be used if you are incapacitated and your disability is evidenced by a written statement by one or more doctors. This is known as a "springing" durable power of attorney because it "springs" into action once you are disabled.
I typically do not use this type of power of attorney for that very reason, i.e., most people like the fact that the power of attorney can be used if they are unavailable, i.e., out of town; it does not have to be used only upon their disability. A "springing" durable power of attorney can be a problem if something needs to be done on your behalf in a hurry because the agent cannot act until he or she has secured certification from the principal's doctor(s) that the principal is in fact disabled; this can sometimes present a problem if immediate action is required by the agent and he or she cannot get a doctor's certification quickly enough.
Another step you can take as a protective device and one I always recommend to my clients, is that you make sure that whoever you have named as your agent does not have access to a copy of the power of attorney until it needs to be used. In other words, if the agent does not have a copy of the financial durable power of attorney, he or she obviously cannot use it to your detriment.
I hope this discussion helped to address your concerns regarding your implementation of a financial durable power of attorney because this is such a valuable document to have as part of your overall estate plan, and I would hate to have you not prepare one out of fear of misuse. I encourage you to discuss your concerns with the estate planning attorney you ultimately end up retaining and hopefully he or she can review this issue with you in more detail at that time. Good luck.