This page addresses common issues in granting financial power of attorney to an agent. Because there are several types of power of attorney, these issues should be considered before choosing a power of attorney form.
Drafting a Power of Attorney
A financial power of attorney should be narrowly tailored to the specific needs of the principal. Some provisions in power of attorney form documents may be overly broad or unnecessary. To understand the consequences of each provision in a power of attorney, refer to a drafting guide or another POA reference guide.One of the best power of attorney drafting guides is Durable Power of Attorney Line by Line: A Detailed Look at a Durable Power of Attorney and How to Draft It to Meet Your Needs. This instruction manual comes with sample power of attorney forms. Durable Power of Attorney Line by Line by Jason P. Walton also provides guidance on issues such as using a springing power of attorney, gifting, and other optional provisions you may wish to include in a POA.If you want to make a power of attorney quickly or cannot afford to hire an attorney, you can purchase estate planning software that allows you to print your own financial power of attorney at home. If you plan to make your own power of attorney, be sure to follow all instructions provided in the software, such as filling in all signatures and initials, complying with state notary requirements, and other requirements of applicable state laws.
Powers You May Wish to Withold In a Power of Attorney Form
When granting power of attorney, you have the ability to withhold certain powers from your agent. If you don't want your agent to have authority over certain matters, ask your lawyer to address this when the power of attorney is drafted. If you are using a power of attorney form to prepare your own POA, follow the form instructions on how to withhold specific powers.You may not want your POA document to authorize your agent to: 1. Make changes to your life insurance policies, such as changing beneficiary designations. 2. Make codicils and amendments to your will or living trust, make new estate planning documents for you or revoke existing ones. 3. Make gifts from your assets to anyone, including the agent. 4. Pay your agent's expenses or debts that are unrelated to services performed on your behalf. 5. Sell your house.There are legitimate reasons why you may want your agent to have the powers listed above. For example, your agent may need to sell your house to raise enough funds to pay for your long term care or assisted living. If your estate is likely to be subject to significant estate tax liability, you may want your agent to continue an established practice of gifting. If you pay living expenses for the person you name as agent and your agent relies on that, you may want to ensure that practice continues during any period of incapacity. While there are some beneficial reasons to grant your agent the powers listed above, your agent could also abuse these powers to your detriment.Deciding which powers to grant in a power of attorney can be challenging unless you have a high level of confidence in the person you name as agent. An estate planning lawyer can provide valuable guidance on how to tailor the POA document to address your concerns. See finding an attorney.
Limited vs. General Power of Attorney
When granting power of attorney, you have the option to grant a general power of attorney, which gives the agent broad and sweeping authority over your assets and other financial affairs. A general power of attorney allows the agent to take any actions the principal can take. See financial power of attorney.If you are concerned about giving your agent more power than may be necessary to achieve your estate planning objectives, the other option is to grant a limited power of attorney, which restricts the agent's authority to those specific powers you include in the document. When making a power of attorney, choose the correct form, either limited or general, after carefully considering the types of matters you want your agent to handle.