Tuesday, March 12, 2013

Should I sign a Power of Attorney?

If you are doing planning for what should happen if you became incapacitated, one of your options is to sign a document called a Power of Attorney.  If you sign a Power of Attorney, you give power to someone to act on your behalf.  You are called the “Principal.”  The person that you authorize to act on your behalf is called the “Attorney in Fact.”   In Minnesota, there is now a form that can be used called the Statutory Short Form Power of Attorney..

A Power of Attorney is a very powerful document.  This makes it both useful and dangerous.  You really must trust the person to who you are giving it. 

You read about the abuse of the Power of Attorney in the newspaper on a depressingly regular basis. People execute a Power of Attorney naming one or more of their children as Attorney in Fact, intending that the child will help them as they age.  The child then abuses the trust the parent placed in him or her and uses the parent’s money for the child’s own bills or pleasure.  Usually, this abuse is discovered after the fact and by then the money is usually irretrievably gone.  For this reason, police have started calling a Power of Attorney a “license to steal.”

You should not give a Power of Attorney to anyone you do not completely trust.  However, there are some actions you can take to try to protect yourself if you decide to give someone a Power of Attorney. 

First, in the Statutory Short Form Power of Attorney, you can name two people who have to act together.  If you do this, abuse of the Power of Attorney requires both named persons consent to the abuse. 

Second, you can require from the Attorney in Fact periodic explanations of the actions  the Attorney in Fact taken under the Power of Attorney (called an “Accounting”).  In the Statutory Short Form accountings can be required on a monthly, quarterly or annual basis. 

Third, you can provide that the accounting must be provided to persons in addition to yourself.  So, if all the children get accountings, the chance of one child inappropriately taking the money is lessened.  Providing that a neutral professional like your accountant be given the accounting can be even more effective, although the neutral will need to be compensated for their oversight.

Fourth, you can provide that the Attorney in Fact cannot transfer assets directly to themselves.  This restriction, however, is easy to circumvent by appearing to pay bills or using a straw payee.

None of these options are mutually exclusive.  You could use all of them.  However, it cannot be stressed too much that you really must trust anyone that you name as your Attorney in Fact.  There is no substitute for picking an honest Attorney in Fact.

Visit us at: www.tl-attorneys.com

No comments:

Post a Comment