Powers of Attorney: 6 Costly Mistakes to Avoid

You have heard of the advantages of having a power of attorney. Today I’ll explain easy steps you can take to avoid costly mistakes.  These mistakes can make your Power of Attorney (POA) useless and put your money at risk.

A POA is a legal document that must be in writing and witnessed. You, the grantor, give certain powers to another person (an attorney). The document allows your attorney to act for you as your agent. You can give a general POA to handle everything or limit it to only to sell your car.

A POA can be as short as one line, “I appoint my daughter as my attorney.” You may have used a kit or online form to prepare a POA for yourself. Or you may have had one prepared by a lawyer. Regardless of how it was prepared, you should check your POA form now. It may be too late later to correct what are common mistakes.

Mistake no.1: your potential incapacity is not covered

What is the real benefit of a POA? It allows the attorney to act on your behalf if you can no longer act because you are incapable. Your POA must then specify that it is valid even after any legal incapacity on your part.

The words “enduring”, “continuing”, and “ongoing” are not enough. There must be a reference to the POA being valid even if you subsequently become legally incapacitated.

Every province and state has its own rules for POAs. So you cannot expect a document you sign where you live to be valid in another jurisdiction. Remember, this post is for information purposes only. It is not a substitute for proper legal advice.

Mistake no.2: your capacity is not confirmed

All POAs must be signed while a person is competent. This is why planning in advance is so important. Persons in nursing care, those suffering any illness or the elderly may need to have their capacity to give a POA confirmed to prevent legal challenges.

Confirmation is usually done by a lawyer. The lawyer confirms that there is no undue influence, coercion or suspicious circumstance present. He then confirms that you as grantor or donor of the POA have the capacity to sign.

A meeting between you the grantor and lawyer must take place to assess capacity. What if one of your parents develops mild dementia? You would like to act as their attorney. You must remember that the parent must be capable of requesting the POA and not you as attorney.

Mistake no.3: you forgot to designate an alternative attorney

You should make sure that there is always an alternative attorney designated. This is in case one of your attorneys moves away or the person chosen refuses to accept the responsibility of acting as attorney.

You should confirm with your attorneys in advance of the appointment. This is important to ensure that they will accept the position.

POAs made by persons in middle age will need to be checked regularly to ensure that the attorney has not moved away, died or lost capacity themselves.

Mistake no.4: you don’t fully trust your attorney

The attorneys can do whatever you can do, including spending or mismanaging your cash and selling your property. Abuses are always possible, even among family members. If you don’t fully trust  a person, find a replacement or restrict the attorney’s powers.

Mistake no.5: your POA is not properly witnessed

If not properly witnessed, your POA could be invalid. Two qualifying witnesses are required. The witnesses cannot be a spouse or partner of you or your attorney. You and the attorney and your children cannot act as witnesses. Witnesses may need to give evidence that you had capacity at the time that the POA was signed.

The staff of nursing homes or hospitals usually will not agree to act as witnesses. Any documents executed in these circumstances may require that you bring two witnesses and confirm capacity by obtaining a written opinion from your attending physicians.

Mistake no.6: you forgot to amend the standard forms

Some POAs are four legal sized pages of printing. Not all the material on the POA may be appropriate to your needs. You need to read the form and initial changes.

If you do not want the attorney to deal with your home, to sell or mortgage it, then you will need to specify this in the document. If it is only for the purpose of dealing with foreign assets, specify this too.

Make sure that a lawyer in the foreign jurisdiction prepares or has approved the document’s use. If the POA is only for a particular bank account then the document should specify this. If you believe that your attorney should not be compensated for his services, then you may wish to specify this in the document.

Related post and the MrWills guide to POAs:

Why Resolve to Get a Power of Attorney This January?

Powers of Attorney: 10 Essentials You Need to Know

Edward Olkovich (BA, LLB, TEP, and C.S.) is an Ontario lawyer, nationally recognized author and estate expert. He is a Toronto based Certified Specialist in Estates and Trusts. Edward has practiced law since 1978 and is the author of seven estate books. © 2013