Powers of attorney help to protect the principal who drafts the documents. In an emergency where they cannot act on their own behalf, another person can manage their medical care or their finances. People who pride themselves on their independence may feel anxious about assigning legal authority to an outside party.
The failure to establish powers of attorney can leave people in a very vulnerable position if they have a sudden medical event or get hurt at work. Principals who integrate appropriate protective restrictions into their powers of attorney can take proactive steps to protect themselves without worrying about someone else abusing delegated authority in the future.
What provisions can limit the exposure of a principal who is drafting their powers of attorney?
1. Separate medical and financial authority
Drafting separate documents for medical support and financial assistance can be a smart move. People may be able to designate a health care decision maker in their advance directive. They may want to consider naming a different person as their financial agent. When two different people manage financial and medical matters, there is less reason to worry about one person abusing their authority for personal gain.
2. Delaying the transfer of authority
Financial powers of attorney protect people from scenarios in which long-term incapacitation could cause serious hardship. Typically, people must miss multiple months of payments for the worst financial consequences to be an option.
Mortgage lenders typically can’t foreclose until a homeowner misses at least four consecutive payments, for example. Principals can require that their incapacitation last a minimum amount of time, such as three weeks, before their agent or attorney-in-fact has access to their resources. Doing so can prevent the misuse of authority in a short-term situation that is unlikely to cause financial complications.
3. Limiting financial control
Some financial powers of attorney are incredibly broad. They give the agents the opportunity to make any necessary transfers and access all resources owned by the incapacitated person.
Principals can instead choose to restrict an agent by only granting them authority to access specific assets or manage particular financial obligations. The act of intentionally limiting their control can help ensure that they meet an individual’s baseline needs without having the ability to damage their finances.
The best powers of attorney typically include highly-specific terms based on an individual’s assets, obligations and potential support needs. Reviewing financial obligations with a skilled legal team can help people integrate the right provisions into powers of attorney in case they ever experience an incapacitating emergency.