by Anita Schnee, Attorney at Law
We repeat this again and again: it is vitally important to create powers of attorney (POAs). Everybody over 18 needs to designate a trusted person – called an agent or attorney-in-fact – with the authority to speak and act for them in health-care and money matters, if they become unable to make decisions for themselves. This is accomplished by the person who needs the POA – the principal – appointing trusted agents by way of POA documents.
Scroll down on our home-page, here, to download our free financial-POA brochure about why this is so important.
If you have been asked to be an agent, also check out the free guide, published by the Consumer Financial Protection Board, that provides an overview of the responsibilities involved in managing another person’s money. Find it here.
One common misconception should not trouble you. It is simply not true that a POA agent could end up owing money for the principal’s unpaid medical bills. Generally, POA agents only act on behalf of the principal. Unless agents act negligently or fraudulently, ordinarily they do not become personally liable for the principal’s obligations.
Otherwise, though, an agent’s responsibilities can be significant, and there are a number of pitfalls to be aware of. Before you agree to serve as POA, think about family dynamics. Would you have the fortitude to stand up to unwarranted anger or suspicion from family members, and still do what you think is best for your principal?
Take care before you sign any agreements as POA with a nursing home. Look for words in the document you’re asked to sign like “guarantor,” “guarantee,” or “responsible party.” These terms might mean that by signing as POA, you will be consenting to pay the nursing home if the principal can’t or doesn’t pay. Before you sign, if possible, bring the agreement to us for our advice. Also, if you do sign, be sure and write, after your signature, that you are signing as your principal’s agent and not yourself personally.
Also, banks are sometimes less than helpful. They can refuse to honor the POA, even if the document contains language requiring them to follow the POA or be sued. Many banks still insist that you use their POA forms, regardless how thorough your document is. It’s regrettable, but we do suggest that your principal also signs the forms required by all financial institutions involved.
Watch out for banks claiming that you must co-sign loan documents before they will allow you as POA access to information about the debt. Do not do this. Come see us and we will help you fight this improper practice.
Don’t agree to co-own property with your principal, as a general rule. This could expose you to unexpected liability.
You must also always remember to keep your money separate from your principal’s, and to use the principal’s money in the principal’s best interests only.
If the situation with your principal or the family becomes more than you can handle, you can resign the position. We make sure that our POA documents name successors or alternates to step in for you. If not, banks are a possibility as a financial agent, or you might have to take recourse to court proceedings for a guardianship. This would be unfortunate, as the main reason to create a POA is to avoid guardianship proceedings. Still, they remain an option as a last resort.
If you are in any doubt about your duties as agent, don’t hesitate to come see us. We can recommend precautionary steps you can take, to minimize the possibility of conflict or exposure to liability.
