Like other estate planning tools, powers of attorney must meet the legal standards imposed by state law. Though these documents are flexible and powerful, a lot of people don’t really know much about them. To help you better understand powers of attorney, let’s take a little time to look at some of the commonly held myths about these documents.
Myth 1. Powers of attorney involve lawyers.
This myth is entirely understandable because of the legal terminology used with powers of attorney. When we talk about a power of attorney, we are talking about a type of legal document. Though it is named “power of attorney,” the document does not involve lawyers in any way. (While you should always have an experienced and qualified lawyer create any legal document you intend to use, this isn’t where powers of attorney get their name.)
You don’t have to be a lawyer to create a power of attorney, nor do you have to appoint an attorney as your agent when you create these documents. Further, naming someone as your agent or attorney-in-fact doesn’t give that person the right to practice law. Creating powers of attorney simply gives you the ability to name a representative who can make decisions for you and represent your interests.
Myth 2. Powers of attorney are dangerous because they will allow someone to take advantage of me.
There is some truth to this myth, but the fears it represents are widely overblown. After creating a power of attorney, you will give a person or organization the right to represent you and make legally binding decisions on your behalf. You might, for example, give someone financial power of attorney and allow that person the ability to manage your money and finances. If you do this, doesn’t that mean that the person you appoint can simply take your money and run?
While there is nothing that physically prevents an agent from abusing his or her authority, there are legal safeguards in place. In fact, an agent who abuses his position can face not only civil penalties, but can also be charged with a crime and face a lengthy jail sentence.
An important consideration in creating a power of attorney is who is a trustworthy person you know who can and will serve as your attorney in fact.
Myth 3. I don’t have to worry about a power of attorney because I made one years ago.
A good power of attorney is only as good as you allow it to be. If you created your powers of attorney years ago, you need to go back to review and update them. Even though your documents may be legally valid, a lot of third parties won’t accept powers of attorney if they are out of date. It is becoming increasingly the unfortunate situation that financial institutions are refusing to accept older powers of attorney that they consider “stale”.
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