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The Risks and Rewards of Power of Attorney

While most of us prefer not to think about it, the reality is that disaster can strike at any time. In truth, a critical illness or accident could leave you incapacitated at any moment.

Should that time come, don’t you want to take steps now to ensure that your family is cared for, and your wealth protected?

That’s where a power of attorney comes in. This is an incredibly important legal mechanism, allowing you to plan ahead for circumstances where you may be unable to manage your own medical or financial decisions - but it’s not something you should plunge into without doing a little bit of research.

Power of Attorney, Defined

Broadly speaking, power of attorney (POA) is a legally binding document that allows you to appoint a specific person or group to manage your affairs should you become unable to do so. When they assume the power, this person is known as your agent, or sometimes the agent-in-fact or attorney-in-fact.

There are different types of POA designations, each granting your chosen agent different degrees of authority and access. Here in Illinois, there are typically two types of limited POA that individuals need to consider:

  • Power of Attorney for Health Care: This designation gives a proxy the ability to make medical decisions on your behalf, should you be unable to do so on your own
  • Power of Attorney for Property: This grants your chosen agent the power to make financial and legal decisions on your behalf, often having to do with property

Keep in mind that there are other restrictions and levels of control that you can set up when you go through the POA process. For example, many individuals choose to grant “limited” powers of attorney, rather than “general” powers of attorney. This decision cedes your agent the power to act only with regard to certain matters and within a given timeframe, which you may specify.

You may also restrict when your POA goes into place; some people choose to set up “springing” powers of attorney, for example, which do not take effect until after a specified date, or after the occurrence of a specific event.

It’s also important to remember that there is a distinction between durable and non-durable powers of attorney; a durable POA is one that stays in effect even if you (the principal) become incapacitated or mentally incompetent. A non-durable POA, in contrast, ceases to have any authority when the principal is deemed incompetent.

Do You Have Any Reservations About Granting POA?

If you have concerns about granting POA, you’re certainly not alone. While this is generally considered to be an important consideration for seniors and other individuals looking to plan ahead, it’s also important to recognize that it is an enormous step - one that shouldn’t be taken lightly!

After all, you are granting another individual the ability to make significant decisions on your behalf, all having to do with your personal and financial wellbeing. These are some of the most important and sensitive matters that most people ever have to deal with, and there is always the risk, however slight, that someone you name to be your agent may abuse their powers.

As AARP points out, “one in five older adults fall victim to some form of financial exploitation.” Fraud and abuse are legitimate worries. But it’s important to realize that there are steps you can take to mitigate the risks of losing control of your own life.

For one thing, there are the numerous safeguards we named earlier. Broadly speaking, principals can exert a significant amount of control when it comes to what powers they give their agent, and may even dictate how (and how long) that agent may exercise those powers. So, say, if you only wish for your agent to pay bills on your behalf, you may specify this in your POA.

You may also set down strict guidelines for how to handle your healthcare and financial decisions, using outside mechanisms, such as an advanced healthcare directive or living will, which dictate your health care and treatment wishes. You can generally revise or revoke your POA documents at any time, provided that you are able to be declared mentally competent.

Finally, remember that you ultimately have the power to select your own agent. It’s important to choose someone you trust completely, whose values and communication style mirror your own, and who you believe will act with your best interests at heart at all times. With this in mind, most people opt for a close friend or family member whom they trust implicitly.

And though you may be hesitant about wading into matters of POA, remember that failing to do so could be far worse. As the New York Times  once put it:

“...even if signing a power of attorney makes the client feel vulnerable, it’s far better than living without one. If you become incompetent, you lack the capacity to make legally binding commitments. Without a power of attorney, your family might have no choice but to ask a court to appoint a guardian to oversee your finances. This can be an expensive and sometimes embarrassing ordeal and can involve unpleasant, even acrimonious, exchanges.” 

If you’d like to discuss any other matters relating to powers of attorney in more depth, our talented and compassionate team would be happy to help. Don’t hesitate to drop us a line with any questions or concerns about any aspect of the estate planning and administration process in Illinois, including wills and trusts, probate, or powers of attorney.

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