Protecting Your Wishes: Appointing Your Attorney-in-Fact
Many of you are likely to have a signed Durable Power of Attorney in place. But do you fully understand the provisions contained in your Power of Attorney and the actions your designated attorney-in-fact can take if you are incompetent to make your own decisions? Are you confident that you have chosen the best person for such an important position? Is the person you originally selected still the right person?
Durable Power of Attorney and Selecting Your Agent
A Durable Power of Attorney is a legal document that allows an individual (the “principal”) to designate another individual (the attorney-in-fact, or “agent”) the authority to act on his or her behalf when dealing with third parties. A Power of Attorney is considered “durable” if the agent’s power remains in effect while the principal is incapacitated or no longer competent to manage his or her own affairs.
Selecting an agent that you trust completely is the most important thing you can do to protect your assets. You should select your agent carefully and deliberately by thinking about the following traits. Your agent should:
- Be responsible for keeping your property separate from his or her own
- Be able to act objectively in your best interests when managing your property
- Possess financial management and business judgment skills
- Have the time to manage your affairs properly
You should keep in mind that there may be occasions where the agent will have to travel if you select an agent that does not live near you, even though many transactions may now be handled online or over the phone.
If you do not have someone that you trust to handle your affairs, you may appoint a bank officer to serve as your agent. Note that the officer will charge a fee for services, which may be a percentage based on the amount of your assets or per transaction.
Appointing More Than One Agent
You may also choose more than one agent to serve for you at the same time. You must indicate whether the agents can act alone or whether they must act together. Having them act together is a good idea if you think they have qualities which will allow them to act in your best interest, but you are not confident that either is capable of handling the position alone, or if the appointment of a second agent provides for a second opinion. Conversely, if the agents are allowed to act separately, your estate will have greater flexibility because actions can be taken even if one agent is unavailable. This type of appointment is helpful if one of the agents does not live near you or the agents have very busy schedules. However, appointing two agents may be detrimental if the agents are incapable of working together in your best interest.
The Potential for “Self-Dealing”
While powers of attorney are widely used and commonly accepted, the potential for abuse often is overlooked. Examples of powers that provide the opportunity for agent self-dealing include the power to: change the beneficiaries of the principal’s bank accounts, withdraw and/or transfer funds, enter the principal’s safe deposit box and, particularly, the power to make gifts. Each of these powers grants the agent the authority to potentially provide for him or herself at the expense of other individuals entitled to benefit from the principal’s estate.
You may have a trusted agent; however, you should carefully consider the dynamics of your family and/or friends, and the relationships they share not only with you, but with each other. For example, a spouse from a second marriage could make gifts to herself and her own children with the intent of depleting your estate so that your children from your first marriage receive lesser shares. If you have children that don’t get along well with each other, the child or stepchild appointed as agent could provide for him or herself and not provide for siblings equally.
The document could provide that gifts may only be made equally to certain groups or classes, under certain circumstances, or a special agent could be appointed for the purpose of making gifts. You should carefully consider whom you want to share in your estate and consult with your attorney to ensure that your document accurately reflects your wishes.
For a further discussion of Durable Powers of Attorney, please refer to the Winter 2009 newsletter, entitled “Who Needs a Power of Attorney?”
Frank Baldino co-chairs the firm’s Estate Planning & Probate group. He has extensive experience with estate and tax planning for citizens and non-citizens, charitable giving, asset protection, business planning, and estate and trust administration. Frank may be reached at email@example.com or 301-657-0175. Christine Buckley is an attorney in the Estate Planning & Probate group. She may be reached at firstname.lastname@example.org or 301-657-0721.
This article originally appeared in Lerch, Early & Brewer's Legal Update Winter 2010 issue. It is for your information only and is not intended to constitute legal advice. Please contact your attorney for more information.
Copyright 2010 by Lerch, Early & Brewer, Chtd.