Part of being a lawyer is finding references to the law just about everywhere you go–especially when you turn on the television or go to the movies (I remember my professor for Property during my first year of law school telling us that Body Heat was, first and foremost, about the rule against perpetuities). So, when my wife and I were relaxing in front of the TV a few weeks ago, this line caught my attention:
This line came from (as you might have guessed) black-ish, a comedy on ABC. It’s a funny line, but it’s based on an unpleasant truth: sometimes agents use a power of attorney to take advantage of the very people they’re supposed to be protecting.
First, if you’re an agent under a power of attorney, go read this. It’s a post I wrote a while back about how to do a great job as an agent, and I think if you’re doing what that article recommends, you’re taking the job seriously, and you’re probably going to do a great job.
But what can we do if we’re planning?
Pick the right person. This, more than anything else, is the key to avoiding problems. Particularly for a financial power of attorney, it mostly it comes down to a combination of competence (organizational skills, attention to detail, ability to handle numbers) and trustworthiness. It needn’t be someone in your family; as this article suggests, a bank trust department might be willing to handle the role–but that may be expensive or require you to have a lot of money deposited at the bank.
Consider whether you need help right now, or if you can wait until you become incapacitated. There are a couple of different ways to deal with when a power of attorney takes effect. First, you could make it effective immediately. Of course, this means your agent has power right away–at the same time, you are also in a position to monitor your agent’s behavior. Second, you could wait for a doctor (or multiple doctors) find you incapacitated. This delays the grant of power until it’s needed, but it comes at a cost, the delay needed to get a doctor’s finding of incapacity. Some powers of attorney require multiple doctors to find incapacity, but that increases the delay. Generally, I prefer delaying the granting of power until it’s needed: if you need a hand today, no problem, but if you don’t, let’s wait.
Consider naming multiple agents–but be careful. The risk of your agent doing something wrong decreases when there are multiple agents involved–each agent is a check on the other. However, there are some serious difficulties with naming multiple agents. If the agents disagree about what actions are in your best interest, how will those arguments be resolved? Additionally, if multiple people have to authorize a transaction, that’s going to slow things down, even if everyone is in agreement. On balance, I generally don’t like multiple agents, but under some circumstances, it’s worth considering.
Review your choices. As part of reviewing your estate plan, you should consider whether or not the choices you made in your power of attorney still make sense. Things change, and a person who was a great choice five years ago might not make as much sense today. If you’re periodically reviewing your estate plan–and you should be–you should make sure that the agent you selected still makes sense for you.
Don’t add the agent to your bank accounts. I’ve touched on the dangers of adding people to bank accounts in the past, and those things are still true. Adding an agent as an accountholder gives your agent partial ownership of the account–it’s as much theirs as it is yours.
None of these actions guarantee that your agent won’t do something wrong, of course. However, taking these steps–especially that first one about picking the right person–can help minimize the risk of a problem. And Diane’s right about the “prize,” in a way, being named as someone’s agent is a tremendous honor, and one that any agent should take seriously.