Power of attorney is a legal tool that can play an essential role in both financial and medical decision-making. However, there are many misconceptions about what a power of attorney (POA) can and cannot do. This can sometimes cause hesitation or confusion when people are considering whether to set up a POA for themselves or loved ones. It’s important to clear up misunderstandings around this topic. Here are some of the most common misconceptions about power of attorney and why understanding the facts is crucial.
Below, our friends at W.B. Moore Law discuss practical and legally sound approaches to setting up POAs that work for both individuals and their families.
Not Only For The Elderly
One of the biggest misconceptions is that only elderly individuals need to consider a power of attorney. While POAs are indeed beneficial for older adults planning for their later years, they can also be vital for younger individuals. Unexpected events, including accidents or sudden illness, can occur at any age, leaving someone temporarily or permanently unable to make decisions. In these cases, having a POA in place ensures that a trusted person can make necessary decisions on behalf of the incapacitated individual, regardless of their age.
It Isn’t A Permanent Decision
Another misconception is that granting power of attorney is a permanent decision that removes the principal’s control indefinitely. In reality, most POAs are flexible and can be customized. A person can specify conditions under which the POA becomes effective, such as after a doctor’s confirmation of incapacitation. Additionally, principals have the option to revoke or change the POA at any time, as long as they remain mentally capable. This flexibility allows individuals to have peace of mind while still retaining control over their decisions if they choose to do so.
Misunderstanding Agent Responsibilities
People sometimes believe that a power of attorney gives the agent unrestricted control over all of the principal’s affairs. However, the powers granted to an agent can be narrowly defined. A limited power of attorney may be created for specific tasks, such as selling a piece of property or handling particular financial transactions. Even with a general power of attorney, the agent is legally obligated to act in the principal’s best interests, avoiding conflicts of interest and acting transparently.
Another critical point is that the agent’s power does not extend beyond the principal’s lifetime. Upon the principal’s passing, the POA ceases to exist, and the executor or administrator of the estate will handle the principal’s affairs according to the terms of their will or state law.
It Does Not Replace A Will
Some people mistakenly believe that a power of attorney serves the same purpose as a will. While both documents help manage an individual’s affairs, they function very differently. A POA allows an agent to make decisions while the individual is still alive, particularly if they are incapacitated. A will, on the other hand, takes effect after the individual has passed away, detailing how assets should be distributed. These documents complement each other, but they address distinct stages in an individual’s life and death.
Medical And Financial POAs Differ
There are multiple types of power of attorney, each designed for different situations. Two of the most common types are financial and medical POAs. A financial POA allows an agent to handle financial matters, such as paying bills or managing investments, whereas a medical POA authorizes the agent to make healthcare decisions if the principal becomes unable to make those choices independently. Some individuals may choose to have different agents for medical and financial POAs, depending on the specific strengths and trust they place in each person.
A POA Does Not Necessarily Cover All Needs
Another common misconception is that a general POA covers all possible decisions that may arise. However, some financial institutions may require their own specific POA forms, and additional authorizations may be needed for certain government benefits or real estate transactions. It’s often advisable to check with banks or relevant entities to see if they have their own requirements.
Creating A POA Isn’t Complicated Or Expensive
Many people worry that setting up a power of attorney will be too complicated or expensive. In reality, creating a POA can be straightforward and affordable with the right legal guidance. Attorneys can help customize the POA based on individual needs, ensuring clarity and avoiding potential issues that might arise. Taking this proactive step often saves both time and costs in the long run by reducing the need for court involvement if decision-making becomes a challenge.
Power of attorney can provide invaluable support in managing personal, medical, and financial affairs, but it’s essential to understand its limitations and purpose. Dispelling these common myths is a good first step in creating a plan that truly reflects individual wishes. Need to talk about creating a power of attorney? Reach out and schedule your consultation with a POA attorney today!