Financial Powers of Attorney are critical tools in your estate planning toolbox. While a Will only affects the management & distribution of your assets after you die, and a Trust only controls those assets that have been transferred into Trust, the Power of Attorney is the tool used to specify who you want to manage your assets (not covered by a trust)  if you become incapacitated or are otherwise unable to do so.  HOWEVER, there is much room for abuse of this power that can leave you & your property open to very unwanted consequences.
 
Forbes recently ran a story (“Taming the Superpower” 06.04.07) by Ashlea Ebeling about a sick woman in Pennsylvania who gave her second husband a financial power of attorney only to find that he used it (wrongly, according to her son) to make a gift to himself by transferring the house - her house – into his own name.  Her son argued that his mother had always intended to leave the house to him, and when she died three years later  he won this argument in court.  However, by that time, the house was already in foreclosure. 

Does that mean you shouldn’t have a Power of Attorney?  No.  Just be careful and understand what powers you are granting.

THINGS TO KNOW:

 ¨      Preprinted Forms.  They may be fine but don’t confuse ease of execution & low cost with effective directives.  Remember, an attorney drafted form can be customized to your particular needs – granting no more AND no less authority to your attorney in fact than you intend.

¨      You can limit your agent’s power to control only certain assets.

¨      You can prohibit certain acts such as selling an asset (house, stock, etc.)

¨      You can also decide whether you want the power to be immediately effective or “springing” which means your agent’s authority to act only spring into being after some predetermined event – typically a medical certification of your incapacity.

¨      Make sure that your attorney in fact understands what you want him or her to do should he or she need to act under the power of attorney you granted.

 ¨      Check with your bank and brokerage firm.  They often require that you use their own form for powers of attorney affecting those accounts.  Your general financial power of attorney may grant the holder power to deal with these accounts, but it’s usually not worth the headache of fighting with the institution unless you have to do so.