Most people understand the basic concept of a last will and testament: a document that directs how assets are to be distributed after someone dies. However, according to an article from A Place For Mom, “5 Misconceptions About a Power of Attorney,” there’s a lot of confusion over this legal document.
Misconception #1–You can sign a power of attorney, even if you are legally incompetent.
Not true. This is one of the most common misconceptions. In fact, if you have a document from a medical doctor that says a person is not competent, that person is no longer able to sign any legal documents. Many people generally think about what they need to do, i.e., accessing a bank account, when an elderly parent can no longer do so. However, if Dad lost his legal capacity just before a power of attorney or living trust was signed, that’s no longer an option. You’ll have to go through a guardianship or conservatorship proceeding through the court to have any control over Dad’s assets.
Misconception #2—You can find a power of attorney document online.
You might find such a document online but it most likely will not be suited to your circumstances. You need to have a power of attorney custom drafted, so it is legal in your state and addresses your family’s needs. Many online documents end up being useless. It’s a big risk to take.
Misconception #3—A power of attorney lets the agent do whatever they want.
The agent under a power of attorney has a legal and fiduciary duty to make decisions in the best interests of the person who named them as power of attorney. They have not been handed a free pass; on the contrary, they have a big responsibility to do the right thing.
Misconception #4—There is one power of attorney.
This is why an estate planning attorney is needed for the power of attorney. There are two main types: a general power of attorney and a limited or special power of attorney. They are named correctly: a general power of attorney allows for buying or selling property or managing assets. A limited or special power of attorney refers to a specific transaction or task. Which one you need depends on the laws of your state and the circumstances.
Misconception #5—A power of attorney survives death.
All powers of attorney terminate on death. Once a person has passed, so has the authority for their agent to act on their behalf. A durable power of attorney allows the agent to act in the event of incapacity but not death.
Power of attorney is an important part of an estate plan and requires the specific knowledge of an estate planning or elder law attorney. Don’t wait until it is too late for a family member (or yourself) to have this document prepared and signed.