What Does a Durable General Power of Attorney Do?
A durable general power of attorney equips your agent with the broad ability to make financial decisions for you during your lifetime. So for example, if you want to appoint a family member or friend as your agent, that person has the ability to perform the following actions:
- Write checks out of your personal account
- Pay bills
- Take out loans in your name
- Make investment decisions
- File your taxes
Of course, this list is not exhaustive but most general powers of attorney give the agent broad powers to make financial decisions.
Can My Agent Use My Money for Their Personal Benefit?
Absolutely not. Every agent under a power of attorney has a fiduciary duty to the person giving them that power. What that means is that a power of attorney has an obligation to make sure that any assets they possess or have access to are used only for your benefit (the principal). If the power of attorney does “self-deal”, or use the money for their benefit, it would be a breach of their fiduciary duty and they can be removed as your agent.
Remember when you choose someone to be your power of attorney it needs to be someone you trust. Your agent has an enormous amount of power to make decisions without necessarily having your input. If you do not wholeheartedly trust the person who has power of attorney over you it may be a good idea to remove them and appoint someone else. Unfortunately, it is not uncommon that people will abuse general powers of attorney and you should be vigilant and know the person you are appointing as your agent.
Temporary or Limited Power of Attorney
Powers of attorney can be limited in duration and in scope. If you would like to limit how long the power of attorney will last you should specifically state that in the document. This is called a temporary power of attorney. For example, if you are going out of the country and want to appoint a friend to manage a rental property for you while you are gone, you can provide your friend with a power of attorney that has a set end date.
Similarly, you can execute what is called a “limited power of attorney”, allowing your agent to make decisions for you only on certain matters. Let's say you have a son-in-law you trust and you want him to be able to manage your farm while you are out of town. By executing a limited power of attorney you can explicitly constrain his power to only being able to manage your farm. Your son-in-law would not have the ability to make any other decisions for you in your absence.
Also, it is noteworthy to consider creating a springing power of attorney. A springing power of attorney allows your agent to act on your behalf only if you are unable to make decisions for yourself. Most springing powers of attorney have a clause that states that a doctor must declare that you incompetent before acting. This provides a large degree of protection to you while you are of sound mind as your agent has no power until a doctor states you are unable to act. However, there is a drawback to springing powers of attorney in that it may take time to find a doctor to evaluate you. Under pressing circumstances, this type of power of attorney can be problematic. For example, if your family needs money that only you can provide, your agent must first locate a doctor, have the doctor medically evaluate you, and find you to be unable to make decisions for yourself. Only then would your agent have the ability to make decisions for you. That process can take several days, if not weeks, and could cause significant issues with your family.
Do Banks Have to Honor Powers of Attorney?
No, banks and other financial institutions do not have to accept a power of attorney. When banks decline to honor the power of attorney presented to them it can be enormously frustrating. Various excuses banks give as to why they will not accept the power of attorney range from the age of the power of attorney itself to insisting that the owner on the account be present and authorize the transaction. When banks and other institutions refuse to honor the financial power of attorney here a few actions you can take:
- First, ask to speak with the manager or someone more senior in the bank itself and plead your case
- Second, speak with the attorney who prepared the power of attorney and ask them to speak with the bank
- Third, as a worst-case scenario, you may have to petition the Court for the appointment of a conservator
Perhaps the best way to ensure that the bank will accept the power of attorney is to have a good working relationship with the bank. Set up an appointment with the manager of your bank before the need for the use of the power of attorney arises. Introduce your agent to the manager so that they are familiar with that person and understand your wishes.
Remember bankers are only doing their job and must protect their customers' assets. In many ways, you should want a bank that is strict with whom they allow access to your accounts. However, if you can establish a good relationship with your bank before the time comes to use the power of attorney, it will go a long way in eliminating issues such as these.
Update Your Power of Attorneys Every 3 to 5 Years
Durable powers of attorney are good indefinitely. They technically have no ending date. However, due to the recent rise in identity theft and abuse of power of attorneys, many banks and financial institutions will no longer accept powers of attorney greater than 3 to 5 years old. At the very least they will question the validity of the document. Remember, a bank or financial institution does not have to accept the power of attorney and it is within their discretion to honor it. As such, it is a good idea to update your general power of attorneys at least every 3 to 5 years just to make sure they are current.
Contact Clarksville Attorney John Crow to Create your General Power of Attorney
If you do not have a general power of attorney, no time is better than now to create one. Incapacity can strike at any time and it is imperative to declare who your agent is. Without a power of attorney, your family members will have to petition the Court to establish a conservatorship, costing significant amounts of time and money. Give Clarksville attorney John Crow a call today to discuss creating your general power of attorney.