When used properly a power of attorney can be a highly effective estate planning tool. Unfortunately, a power of attorney can also be abused either by the agent appointed in the POA or by unscrupulous individuals who convince a principal (usually an elderly individual) to sign a POA giving them agent authority. A better understanding of when a power of attorney should be used, as well as the disadvantages to using a POA, will help ensure that you get the most out of your power of attorney in the Quad Cities, Illinois.
A power of attorney is a legal arrangement wherein the principal (the person who executes the POA) gives another person (known as the “agent”) the legal authority to act on behalf of the principal. The extent of the authority granted to the agent by the principal depends on what type of POA is created. A general power of attorney gives the agent almost unlimited authority to act on behalf of the principal. Under the power granted in a general POA your agent could withdraw funds from your bank account, sell your home, or enter into a contract in your name. A limited power of attorney, on the other hand, only gives an agent authority to act on your behalf in a specific situation or transaction. You might, for instance, give someone a limited POA to represent you at the closing on a home you are purchasing because you will be out of the country on that date.
While there are many advantages to using a POA there are also disadvantages as well. A POA automatically terminates upon your death. If the POA is not a durable POA is will also terminate upon your incapacity. Therefore, if your goal is to ensure that a spouse/parent/adult child has the legal authority to control your assets or act on your behalf in the event of your incapacity or death a power of attorney may fall short of that goal.
The other concern with a POA is that the agent will abuse the authority granted to him or her. There are ways to provide someone with access to your assets or accounts without giving the individual complete control over them as you do with a general POA. For example, you could designate a bank account as a “payable on death” account. Doing so ensures that your designated beneficiary becomes the owner of the funds held in the account upon your death but does not allow access to the account while you are still alive.
Before you consider signing a power of attorney prepared by someone other than yourown estate planning attorney make sure that your attorney review the document. If you think a POA would be a beneficial addition to your estate plan, consult with your estate planning attorney.
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