The power of attorney is one of the most important documents in your estate plan, but there are some common mistakes that could render it ineffective. Knowing how to spot these mistakes is key to make sure that you get the most out of your power of attorney and all the benefits it provides. Here are three of the most common mistakes that our Hermitage estate planning lawyer sees people make with their power of attorney documents and what you can do to avoid them:
- Creating a Very Limited Power of Attorney
One common mistake is underestimating what you’ll need a power of attorney to actually do for you. Many people assume they’ll only need it so a loved one can help pay some bills or take care of complicated finances. But what happens if you become incapacitated and need nursing home care and your house needs to be sold to pay for that care? If your power of attorney does not provide for real estate property transactions, then your loved ones will have a very hard time getting things settled. You should make sure that your power of attorney covers the following items at a minimum:
- Real estate property
- Digital property
- Tangible personal property
- Bank and financial accounts
- Business dealings
- Trusts and gifting powers
- Adding a Loved One as Joint-Owner on an Account
You might think you can use an easy loophole – adding a loved one to your bank account – to avoid having to create a power of attorney. Sure, your loved one will then have access to the account and will be able to pay bills and make transactions as needed, just as they could do with a power of attorney. But the issue is that once you make that loved one a joint owner on the account, that account effectively becomes their property. Using a power of attorney is a much cleaner way to let someone else handle your financial affairs.
- Not Using Your Power of Attorney
This may seem like a no-brainer, but there are plenty of people who make a power of attorney document and stick it in a safe or a desk drawer without ever telling anyone about it. Your banks and financial institutions will have no idea about it and could give some trouble to your loved ones when they present it – that is, assuming your loved ones even know where to find the document. The best way to avoid this is to send copies to your bank and other financial institutions where you do business and make sure your loved ones know where to find your documents if they ever need them.
If you have more questions about your power of attorney, or if you’d like to create a new power of attorney as part of your estate plan, please schedule an initial call with April to talk over your plan.