5 Mistakes to Avoid When Creating a Power of Attorney

A power of attorney allows someone you have appointed to act on your behalf and make legal and financial decisions for you. This person is often referred to as your agent or attorney-in-fact, and the document is often, but not always, triggered by your incapacity, which is also known as a “springing” power of attorney. However, as is the case with many legal documents, it can be easy to make mistakes that invalidate the document or make it vulnerable to challenges. Knowing the most common errors can help you avoid them.

Why a Power of Attorney Is an Important Legal Document

If you are relatively young and healthy, you might assume that a power of attorney is unnecessary. However, it’s important to keep in mind that you can become incapacitated in an instant. A sudden illness or accident can happen to anyone.  Overseas deployment or travel are other reasons people put power of attorney documents in place, although in such scenarios the effective date would likely be immediate (or the date of your deployment/trip), instead of the effective event being incapacity.

The actions your agent can take on your behalf will vary depending on what powers you grant them in the document. These can range from paying bills to selling property and filing tax returns.

If there is no power of attorney in place and you are incapacitated, the process to get the same powers can be expensive and time-consuming and involves court intervention in what is known as a conservatorship (for financial and property decisions) or a guardianship (for healthcare and medical decisions)In addition, you will not be able to designate who has these powers if you are incapacitated and an involuntary guardianship or conservatorship is required.

Mistake 1: Choosing the Wrong Person as Your Agent

There are a few ways that someone can be the wrong choice. Your agent does not need to be a financial expert. However, they do need to be up to the job. The individual that you consider closest to you may be bad with paperwork, or they might have a history of making poor decisions under stress.

The person that you choose should be trustworthy and well-organized. They should also understand your wishes. If it’s likely that they will need to deal with complex legal or financial issues, you may want someone who has some experience in that area.

The person might also need to be able to navigate family conflict effectively. In addition, you should talk to the person you’re considering and get their consent. Not everyone will be prepared to take on this responsibility.

Mistake 2: Not Clearly Defining the Agent’s Authority

When drafting a power of attorney, you can grant broad powers to your agent or only very specifically defined ones. Examples might include allowing them to deal with matters related to taxes, retirement plans, stocks and beneficiaries. It’s important that you are clear both in the document itself and in discussions with your agent what those powers are.

Mistake 3: Waiting Too Long to Create a Power of Attorney

You must create the power of attorney while you still have the mental capacity to do so. This means that you need to understand the document you are signing, including the authority that you are granting to your agent.

If you have been diagnosed with an illness that involves cognitive decline, you might need a medical evaluation to determine your capacity. You should consult both an attorney and a medical professional to determine how to proceed at this stage.

Mistake 4: Using a Generic Form Without Understanding State Requirements

There are generic forms available for many different legal situations, and using one may seem like an efficient, money-saving strategy. However, requirements can differ from state to state, and it’s important that your power of attorney document complies with Iowa law.  As with all legal documents, it’s also important to understand what the document that you’re signing does and an attorney can explain this to you.

Mistake 5: Failing to Update the Document When Life Changes

This common mistake can occur after life changes of a financial or personal nature. You might have made some new investments or taken other financial actions that require an update to your agent’s powers. Moving to another state also means you’ll need to update the document.

Your divorce, remarriage and other life changes can also mean that you need to revise your power of attorney. If you originally created the document when your children were minors, and they are now adults, you may also want to make changes.

How to Make Sure Your Power of Attorney Reflects Your Wishes

Start by making sure that you’ve chosen the right agent and that you have clearly defined the powers you want them to have. Your agent should be aware of those powers and know where to find all relevant paperwork. Review the document after any major life changes to make sure it’s still current and reflects your wishes.

When to Get Legal Guidance Before Signing

You may need legal guidance if your finances are complicated or if questions about your mental capacity might arise. However, although you aren’t required to work with a lawyer when creating a power of attorney, it’s a good idea to do so. An attorney can help ensure that the document is prepared correctly, is fully explained to you, and that you have clearly defined your agent’s powers.

Protecting Your Future With a Well-Prepared Power of Attorney

A power of attorney can be critical to protecting your assets for both you and your heirs. We’ve been practicing in Council Bluffs, IA, for more than 125 years, and we can help you prepare a document that does exactly what you need it to do. Contact Peters Law Firm today for more information.

FAQs About Creating a Power of Attorney

Our general FAQs below may help you better understand why and how to prepare a power of attorney. However, every situation is different, and we encourage you to ask questions that pertain to your specific situation.

What is the most common mistake when creating a power of attorney?

There are several common mistakes, including choosing the wrong person to act as your agent and not being clear about what that person is allowed to do on your behalf. People may often wait until they are already considered legally incapacitated to create a power of attorney. Failing to review and update your power of attorney regularly or using generic forms that fail to meet state requirements are other common errors.

Who should I choose as my power of attorney agent?

You can choose a friend, a family member or another associate. However, your agent should be trustworthy, organized, good with financial matters and willing to take on the role. The person may also need to manage family conflict or other difficulties.

Can I change my power of attorney after signing it?

You can change your power of attorney, but in general, it’s best to revoke the existing document and create a new one. You must still have the mental capacity to make the change. You may want to work with a lawyer if you need to change your power of attorney to ensure that you take all the necessary steps to cancel the old document and create the new one.

Do I need an attorney to create a power of attorney?

You aren’t required to have an attorney, but it can be useful. An attorney can make sure that there are no mistakes and that the document only covers the powers you intend to grant. Working with an attorney also helps ensure that you create a document that is specific to your situation.