Tuesday, September 20, 2011

Financial Powers of Attorney Continued--Part 2

In Wilson Rawl's Where the Red Fern Grows, Billy says of his small hunting dog Little Ann, "Dynamite comes in little packages." Financial powers of attorney are as dangerous as dynamite in terms of their potential consequences for ill. Inadequate financial powers of attorney are at the heart of numerous expensive and painful probate cases. Financial powers of attorney are as important as revocable trusts and deserve as much attention.

In an article written by Linda S. Whitton, titled "Durable Powers as an Alternative to Guardianship: Lessons We Have Learned" (37 Stetson L.Rev. 2007), Ms. Whitton states there are three things to understand about durable powers of attorney when used as an alternative to guardianship.

  1. A Power of Attorney is Only as Effective as the Willingness of Third Parties to Accept It.

  2. A Power of Attorney is Only as Protective as the Agent is Trustworthy.

  3. A Power of Attorney will Not Prevent Family Power Struggles over the Principal's Assets.

In this blog, we will look at the second point.

The most dangerous time in a person's life is when they are mentally unable to make decisions for themselves. The chances of being taken advantage of increases during this stage of life. And family members can be the worst perpetrators.

Most often it is family members who are named as the agent for an incapacitated person in a power of attorney. It is crucial that the individual acting as agent is trustworthy.

We have found that in addition to carefully picking the agent, agent accounting requirements adds a safety feature to a power of attorney. If an agent is accounting to the other family members on a regular basis regarding how money is spent for the incapacitated parent, it is less likely the agent will be skimming funds or paying themselves a very high agent fee.

Therefore, it is crucial that the agents are trustworthy. In addition, accounting procedures help facilitate an honest agent.

No comments: