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How do powers of attorney work when added to an estate plan?

On Behalf of | Jun 29, 2021 | Estate Planning

Powers of attorney are arguably the most misunderstood of all estate planning documents. A surprising number of people are so wary about giving someone else authority over their finances or health that they just don’t include powers of attorney in their estate plan at all.

While it is certainly difficult to give someone else the right to make medical decisions on your behalf or conduct financial transactions without your direct oversight, you are ultimately still the one in control. The powers of attorney that you draft can be as limited and specific as you need them to be for your comfort and peace of mind.

You can limit the power you give to someone else

Creating a financial power of attorney does not necessarily mean that someone else just gets to access your bank account. You can place as many restrictions as you want on when and how they can invoke that authority.

For example, you might require that medical professionals indicate you will remain incapacitated for at least a week before anyone utilizes the authority granted to them through a financial power of attorney. You could also limit their control to only certain transactions. You could give someone the authority to pay your credit card bills, mortgage and utility bills from your checking account while never giving them access to your investment account or retirement savings.

You can rely on multiple people to oversee one another

The way that you draft the documents isn’t the only thing that protects you from the misuse of a power of attorney. You also have the option of empowering multiple people so that one person doesn’t have unilateral control over your finances, business or medical decisions. Just like you get to decide who to name as your agent, you can also decide to name multiple agents when drafting your documents.

A combination of placing limits on the powers you delegate to others and oversight for when they invoke those powers can help protect you from the intentional abuse of authority in a moment when you are already vulnerable. Knowing how powers of attorney can protect you can help you make better decisions about whether to draft such documents as part of your comprehensive estate plan.