What is a Power of Attorney?
Simply put, a Power of Attorney (commonly referred to as a POA) is a legal document in which an individual, called the Principal, authorizes a third party, called an Attorney-in-Fact or Agent, to make certain legal decisions (i.e. financial, real estate, estate planning and in some states health care) on the Principal’s behalf. An Attorney-in-Fact does not have to be an Attorney-at-Law, although a lawyer may be assigned by the Principal for this purpose. A POA is generally governed by state statute. Under the law, an Agent binds the Principal whenever the Agent enters into a transaction, as long as he or she acts on the Principal’s behalf and in the Principal’s best interest. This makes the Agent a Fiduciary, or someone who is acting in a relationship of trust with respect to the Principal and his or her property. There are different types of Power of Attorney documents, and it’s always a good idea to check with an attorney if you’re considering entering this kind of relationship.
Are POAs helpful?
With careful planning, the decision to assign a trusted individual as your general POA can be extremely beneficial. Your Agent can take care of straightforward business when the Principal is temporarily unavailable. For instance, an Agent can attend a closing for a sale of real estate if the Principal is out of town. An individual may decide to have his or her Agent assist with routine banking activities or bill paying. It’s important that the Principal stay aware and informed of the Agent’s activities. If dissatisfied, he or she has the power to revoke the document.
There can be a risk of financial abuse through the misuse of a Power of Attorney. POAs are powerful instruments. If placed in the wrong hands, a POA can be used by a greedy and unscrupulous Agent to gain access to the Principal’s funds. Instead of acting as a Fiduciary, the exploiter can use the POA as a vehicle to steal. A sad example is a case in which an older woman needed surgery and asked her younger sister to pay her rent and bills while she was hospitalized. The younger sister agreed, and became an Agent pursuant to a POA in order to carry out her responsibilities. The Agent paid her sister’s bills, but also spent her life savings at a casino—all while she recovered in the hospital.
At EverSafe, we believe that transparency is critical. Our service permits members to assign one or more trusted individuals, such as family members or professionals, to serve as an “extra set of eyes” in monitoring financial transactions. Whether the assigned relative or advocate is your Agent (POA) for this purpose, or you opt to designate a few trusted individuals to assist in account monitoring, one thing is clear. Your funds are safer with EverSafe.