Your power of attorney designation is arguably the most important document in your estate plan. While your will and trusts manage your belongings after you die, your POA may very well determine the quality of life you have in your final years. Choosing the wrong person as the agent of your power of attorney could very well mean losing many of those assets anyway.
Power of attorney abuse is more common than many would like to admit. You may have heard sad stories of a celebrity who declined into ill health while loved ones battled a power of attorney agent who was abusive, negligent or dishonest just to get control of the celebrity’s wealth. It makes the headlines when celebrities are involved, but it happens just as often with normal people in Nevada.
A power of attorney gives authority to someone else to manage your finances if you become infirm or incapacitated. While it may be a comfort to have someone step in and take care of your bills and expenses, if that person is untrustworthy, he or she may take advantage of you. It may seem reasonable or easy to name your eldest child or your best friend, but making a sentimental choice can be disastrous. Instead, advisors recommend taking the following precautions:
- Naming co-agents requires both agents to agree on any actions they take. The cons of this choice are that it may delay some decisions, and there is nothing stopping two agents from colluding against you.
- Create a letter that clearly outlines when and how your agent can act in your name. If you and your agent sign the letter, it provides evidence that you made your intentions clear if your agent should overstep his or her bounds.
- Establish a system of oversight, such as requiring your agent to send regular financial reports to other relatives, an accountant or your attorney.
- You may decide the safest way to avoid being a victim of power of attorney abuse is to hire a professional to be your agent.
It is important to understand that if you sign a durable power of attorney, your agent has immediate authority to act. To protect yourself and your interests, you may wish to seek the advice of an attorney when preparing a power of attorney document.