7 Power of Attorney Mistakes to Avoid Making

A Power of Attorney (POA) is often an integral component within the average estate plan, allowing you to authorize someone to manage financial, legal, or healthcare matters on your behalf. This authority can be invaluable if you become incapacitated, ensuring your affairs are handled appropriately; however, when a POA is misused or poorly executed, it can lead to serious complications. To help you avoid making them, the Essex Junction attorneys at Unsworth LaPlante, PLLC discuss seven common Power of Attorney mistakes.

1. Unclear Terms: A poorly drafted POA can lead to disputes if the Agent’s authority is not clearly outlined. If the document does not specify which financial transactions or medical decisions the Agent is permitted to handle, banks, healthcare providers, or even family members may challenge their authority. Such ambiguity can create unnecessary delays, conflicts, or legal battles, which may prevent the Agent from effectively carrying out their duties.
2. Choosing the Wrong Agent: The Agent you appoint when you create a POA is the individual to whom you grant legal authority to act on your behalf. The person you designate must be trustworthy, capable, and organized. Unfortunately, many people select an Agent based on convenience or family relationships rather than carefully considering whether the person is well-suited for the role. An irresponsible or dishonest Agent might make financial choices that serve their own interests instead of yours. Even a well-intentioned Agent can mismanage responsibilities due to a lack of experience or organizational skills, potentially leading to costly mistakes.
3. Limited Oversight: A general POA often provides broad decision-making authority without built-in safeguards, which can open the door to abuse. For instance, an Agent with access to bank accounts may misuse funds for personal gain. To reduce this risk, your POA can include requirements such as regular financial reporting or appointing Co-Agents who must act together. Without these protective measures, you are relying solely on the Agent’s honesty and judgment, which can be risky.
4. Exploitation and Fraud: Elderly individuals and vulnerable adults are often targets for financial exploitation through a POA. In some cases, a dishonest person may coerce or deceive someone into signing a POA, granting them control over money and property. Once in control, they may empty accounts, sell assets, or make decisions against the Principal’s wishes. Uncovering and addressing fraud can be challenging and costly, and by the time the abuse is detected, the damage may be irreversible.
5. Legal and Financial Risks: An Agent who does not fully understand their responsibilities or acts negligently can cause unintended harm. If an Agent fails to handle taxes correctly, for example, you could face penalties. Additionally, if they engage in improper financial transactions, both you and the Agent could be held liable. To minimize these risks, choose an Agent who is both knowledgeable and responsible, and consider adding safeguards to the POA that limit their authority.
6. Potential Problems with Durable POAs: A Durable Power of Attorney remains in effect even if you become incapacitated, which makes it a valuable tool for incapacity planning. However, this feature can also create problems if an Agent makes decisions that do not align with your wishes. If you recover but the Agent continues acting on your behalf without your consent, disputes may arise. To avoid such complications, your POA should include provisions outlining how and when the Agent’s authority terminates.
7. Issues with Outdated or Revoked POAs: Failing to revoke or update a POA can create confusion. If you draft a new POA but do not properly revoke a previous one, multiple individuals may attempt to act on your behalf, leading to conflicts. Additionally, some financial institutions may be reluctant to accept an older POA, questioning its validity. Although the law generally requires third parties to honor a legally executed POA, an outdated document can still create obstacles. To prevent such problems, review and update your POA regularly, and ensure any revocations are clearly documented and communicated.

Can We Help You Avoid Making Common Power of Attorney Mistakes?

For more information, please attend one of our upcoming FREE webinars. If you would like help avoiding common Power of Attorney mistakes, contact an experienced Essex Junction estate planning attorney at Unsworth LaPlante, PLLC by calling 802-879-7133 to schedule your appointment today.