As we always tell our clients, a power of attorney is just as important, if not more important to you, as your will. Yet most people pay far more attention to the drafting of their will and give their power of attorney (POA) little or no thought.
A last will and testament establishes your desires as to whom and in what manner you choose to leave my possessions and assets when you die. While meaningful to you, it is more relevant to the persons receiving those assets after you’re gone. A power of attorney, however, is critical to your well-being while you are still alive. The power of attorney is used at a time when someone is at their most vulnerable, when you can no longer take care of your own affairs and need the assistance of the person or persons who has been designated as your agent(s).
However, setting up a power of attorney has always been an afterthought for many people. Before computers, a common response to the need for a POA was to pick up a preprinted document from the stationery store, today’s version is to print the document from a website found on the internet, such as LegalZoom.com. Both usually contain language no more specific than “I give my agent the authority to do anything that I can do as a principal”. In fact the fine print on the site informs you that “We are not a law firm or a substitute for an attorney or law firm. We cannot provide any kind of advice, explanation, opinion, or recommendation about possible legal rights, remedies, defenses, options, selection of forms or strategies.” If that is the case, how could you rely on their “non-legal” documents to take care of yourself and your family?
Even when an attorney drafts the document, many will use a one size fits all approach that can often be detrimental to the client. I think that the ease with which this document can be created has led to the myth of its low value in the eyes of the general public. Nothing could be further from the truth.
Here is a recent situation that we faced in our office that serves as an example to highlight the importance of the document and how critical a role it plays in achieving our client’s goals and objectives.
We had drafted the client’s power of attorney. It contains language permitting the agent “to enter any safe deposit box or vault on which [the principal is] a signer and withdraw or add to its contents”. The agent wanted to close the account and surrender the box.
The bank employee reading the clause concluded that this power did not include the ability to close out the box (although he agreed the agent could close the bank account). This is a situation we have come across frequently, an evaluation of the document limited to the express language, rather than examining the document as a whole. Courts have reasoned that the whole document must be examined, and each clause should be used to interpret the others.
If the agent has the power to remove and add contents to the safe deposit box then he has the power to “deal with” the box and therefore has an implied power to open and close the box. We could have had relied in this argument with the bank, however, there was another paragraph in the document that permitted the agent to conduct any banking transaction authorized by a specifically referenced Massachusetts statute. I pointed out to the bank employee the specific language in that law authorizing the agent to open and closed safe deposit boxes. What could have been a long, drawn-out problem was solved quickly through a carefully worded power of attorney.
In our 27 years helping people and their families, I have had numerous instances in which third parties, usually financial institutions, question the language in our documents. As a result, we are constantly updating them. The take away here it to make sure you have a detailed, well drafted power of attorney. Don’t opt for the vague, 2 page, cookie-cutter documents printed off the internet. It could easily be one of the most costly mistakes you ever make.
For more on the mistakes and oversights that can affect people and their families, take a look at our new book: The 10 Biggest Estate Planning and Asset Protection Mistakes People Make and How to Avoid Them! 2nd edition, now including the special bonus chapter, The Biggest Long Term Care Planning Oversights and Opportunities for Long Term Care
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