We all know how important it is to have a Power of Attorney so that management of your finances can be turned over to a member of your family or friend in the event you become incapacitated. If, however, you have not reviewed this document recently, it might not be as effective as you think.
Increasingly, banks, who are concerned about their liability in dealing with such documents, have been refusing to honor them. The question for individuals who have executed a Power of Attorney is how to make the document work when it is most needed, and how to prevent someone from abusing the power.
Generally, the Power of Attorney is needed when the person granting the power is unable to take care of their own financial matters. This can be for any number of reasons and may not be a permanent disability. In New Hampshire, once you sign a Power of Attorney it takes effect immediately. In some other states the powers may only "spring" into effect after you become incapacitated, however, a "springing power" is not available in New Hampshire. Therefore, when you grant the Power of Attorney, you must be very careful in naming an agent you trust since the power can be used at any time. In addition to choosing your agent wisely, with the assistance of your estate planning attorney, you may tailor the Power of Attorney to grant powers that are very broad or very narrow.
To avoid problems with banks, portfolio managers and other institutions that manage your assets, the best advice is to review and update your documents at least annually, and more frequently if there is a family member developing dementia. Call the institutions who manage your assets and see if they have their own forms that they would like you to use along with your Power of Attorney.
The best way to safeguard the Power of Attorney from abuse is to allow your attorney to keep the original with instructions as to its release. Keep a copy in your file at home. This way the person seeking to use the power must contact your attorney prior to releasing the document. The added protection could save you from losses that come with an abuse of such power.
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