If handling your own financial affairs is a challenge, or you worry that you will not be able to manage your affairs in the future due to illness or loss of capacity, you have the right to designate another individual as your agent via a power-of-attorney agreement. An individual with power of attorney can pay bills, sign contracts and manage investments on your behalf. Should your agent become incompetent, however, your finances may be at risk.
A general power of attorney grants your agent the ability to manage your affairs while you are still competent; it loses its validity should you become incapacitated. Many individuals, however, grant their agents durable power of attorney. A durable power of attorney remains valid regardless of whether or not you are incapacitated, allowing your agent to act in your best interests when you cannot. If your agent becomes incompetent, losing the ability to make sound decisions regarding your financial affairs, it negates the entire purpose of the power-of-attorney agreement. An incompetent agent could take actions that are not in your best interests and put your financial security in jeopardy.
If you suspect your agent is no longer capable of managing your affairs, you have the right to revoke power-of-attorney privileges at any time. State laws vary regarding the steps you must take to revoke your agent's privileges but, in all cases, you should notify the agent in writing that you have revoked the power of attorney and his ability to act on your behalf. You should also obtain the original power-of-attorney document from the agent, if possible. You should also send a copy of the revocation notice to any banks or financial institutions that have done business with your agent to ensure they are aware your agent no longer has the legal right to manage your affairs.
In the event you become incapacitated and your agent subsequently becomes incompetent, financial mismanagement is a considerable risk. You can revoke your agent's power-of-attorney privileges at any time provided you are of sound mind. If you are not of sound mind, your family members can take the case to court and request that a judge put restrictions in place to limit the agent's power over your affairs. For example, your family can request the court order your agent to account, in writing, for how your money was spent or designate a guardian to oversee the agent's activities.
If you are concerned your agent may become incompetent and not resign his position voluntarily, you can grant power-of-attorney privileges to more than one person simultaneously and stipulate that neither individual can act without approval from the other. Although selecting co-agents increases the potential for problems due to disagreements, doing so helps ensure that an incompetent agent's behavior does not threaten your financial security.
References & Resources
- Commonwealth of Virginia Department for the Aging: Power of Attorney (p.2)
- NYC Caregiver: Durable Power of Attorney
- Sacramento County Public Law Library: Power of Attorney
- Karl H. Magnus Attorney at Law: Powers of Attorney
- National Center on Elder Abuse: Durable Power of Attorney Abuse (p.3)
- KT Whitehead – Certified Elder Law Attorney: Update on the Law – Financial Powers of Attorney (p.2)
- ElderLawAnswers: Revoking a Power of Attorney
- Lawyers.com: Terminating a Power of Attorney
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